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, 2004

               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.)

305 Madison Avenue Suite 4510
New York, New York                                               10165
------------------                                               -----
 (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 30, 2004, was approximately $152,850.

     Number of shares  outstanding of the issuers  common stock,  as of July 30,
2004, was 6,995,000.

                   DOCUMENTS INCORPORATED BY REFERENCE: None.
                                                        -----
<PAGE>

                                     PART I
                                     ------
Item 1.  BUSINESS.
         --------

     Embryo Development  Corporation is a Delaware corporation (the "Company" or
"Embryo"),  which was organized in March 1995 to develop,  acquire,  manufacture
and  market  various  bio-medical  devices.  The  Company  has not  derived  any
significant revenues since its inception.

     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").  As of
January 2001, all of these licenses had been terminated.

     The termination of the above license  agreements follows a determination by
management  to  conserve  capital  and  that the  products  licensed  could  not
profitably be developed and commercially marketed by the Company at this time.

     The Company  holds  patents to five (5) other  medical  devices and was the
exclusive  licensee of one (1) medical device in the areas of emergency  medical
equipment and peritoneal  dialysis warming  devices.  Although the Company holds
the patents and rights to these products, management does not believe that these
products have any viable marketability at this time.

     The  Company  also held a 10.3%  minority  voting  investment  interest  in
Hydrogel Design Systems,  Inc.  ("HDS"),  a privately held Delaware  corporation
engaged in the  manufacturing,  marketing,  selling and distribution of hydrogel
materials.  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.

     Effective May 25, 2004, Nesco Industries, Inc. ("Nesco"), a publicly traded
company listed on the Over The Counter  Bulletin Board Exchange (OTCC BB, Symbol
NESK),  HDS,  certain  stockholders  of Nesco and  certain  stockholders  of HDS
completed the transactions  contemplated by the Share Exchange Agreement,  dated
as of April 29,  2004  (the  "Exchange  Agreement"),  whereby  HDS has  become a
majority  owned  subsidiary of Nesco and, upon the completion of the exchange of
HDS securities for shares of Nesco common stock, the holders of HDS common stock
and debt will hold a majority interest of Nesco.

                                       2
<PAGE>

     In  addition  to the  exchange  of HDS common  stock and debt for shares of
Nesco common stock ("Nesco Common Stock"), Nesco agreed to dispose of all of its
subsidiaries,  convert  all of its  currently  outstanding  preferred  stock and
warrants into common stock and exchange certain of its indebtedness  into common
stock.

     The transactions  contemplated by the Exchange Agreement are intended to be
a tax free  exchange  pursuant to Section 368 of the  Internal  Revenue  Code of
1986.

     Nesco had  intended to issue shares of its common stock in exchange for the
equity  securities  of HDS in certain  ratios as  provided  for in the  Exchange
Agreement. However, because Nesco did not have the required number of authorized
shares of common  stock to complete  the  exchange  on this basis,  it agreed to
issue  shares of its  newly  designated  Series B  Preferred  Stock  ("Preferred
Stock") for,  among others,  equity and debt of HDS as described in the Exchange
Agreement.  Upon filing of the  Certificate  of Amendment to the  Certificate of
Incorporation  to increase  the number of shares of common  stock which Nesco is
authorized  to issue,  each share of the Preferred  Stock will be  automatically
converted into shares of Nesco Common Stock.

     The Company now holds the equivalent of  approximately  4,837,500 shares or
5.42% of Nesco Common Stock.  Nesco was engaged primarily in asbestos  abatement
contracting   but  had  ceased   operations  in  2003.   See  Item  12  "Certain
Relationships and Related Transactions."

     The major focus of HDS, 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.

     Pursuant to a Share Exchange Agreement,  as amended,  initially dated as of
the 10th day of April,  2004 (the "YBR  Agreement"),  by and among the  Company,
Yellow Brick Road Ventures LLC, a New Jersey limited liability company ( "YBR"),
and Music Asset Corp.,  a Delaware  corporation  ("MAC") that was at the time of
execution of the Agreement a wholly owned  subsidiary of YBR, the Company agreed
to acquire from YBR,  100% of the  outstanding  stock of MAC in exchange for the

                                       3
<PAGE>

issuance by the Company of  22,473,214.29  shares of the Company's common stock,
subject to YBR providing certain financing to the Company in connection with the
exploitation  of the assets of MAC, which,  subsequent to the transaction  would
have  become  a  wholly  owned  subsidiary  of  the  Company.  The  transactions
contemplated  by the  YBR  Agreement  are  intended  to be a  tax-free  exchange
pursuant to 368 of the Internal Revenue Code of 1986.

     The assets of MAC  included  the  non-exclusive  rights to  distribute  and
exploit a music  library of  approximately  9,000  recordings  pursuant  to that
certain Asset Purchase  Agreement (the "Startek  Agreement") made the 7th day of
April 2004 by and between Startek  Entertainment Corp., a New Jersey Corporation
("Startek"),  Joe Venneri who is also President of Startek  ("Venneri") and MAC.
The Startek Agreement  provides that a sale of all of the shares of stock of MAC
to a third party shall not affect the  enforceability  of this agreement subject
to satisfying certain obligations, which the Company met, including the issuance
of 1,000,000 shares of common stock of the Company to Startek.  The value of the
common  shares  granted  ($30,000) was charged to operations in the current year
and is included in current  liabilities  as these shares have not been issued as
of April 30, 2004.

     The Asset Purchase  Agreement  provided that the acquisition price was Four
Million Dollars ($4,000,000) (the "Purchase Price"), payable One Million Dollars
($1,000,000)  on the date of the  closing,  and the  balance  of  Three  Million
Dollars  ($3,000,000)  in the form of a Senior  Secured  Obligation  payable  as
twenty five percent (25%) of Distributable  Net Income as specifically  defined.
As a condition to the sale,  Mr.  Venneri  agreed to work for MAC and receive an
employment agreement, in connection therewith.  The Company was also required to
make a non-refundable  deposit of $25,000 to Startek, which was funded by a loan
from an unrelated third party.

     MAC also  controlled  rights in a letter of intent  being  negotiated  with
Castle Hill Films,  Dream LLC and certain other parties for the acquisition of a
Motion  Picture Film Library.  MAC  represented in the YBR Agreement that it had
disclosed  this Share  Exchange  Agreement and that those parties have agreed to
continue to negotiate in good faith with the  intention of  proceeding  with the
acquisition.

     As of the date hereof,  YBR has not  satisfied  its  obligation  to deliver
financing to the  Company,  and the Company has put YBR on notice that YBR is in
default of the YBR  Agreement  and  Company  shall take all  necessary  steps to
terminate the transaction as provided by the YBR Agreement.  At such time as the
Company  terminates  this  transaction,  the Company  will issue an aggregate of
5,750,000 shares of common stock,  4,250,000 to YBR and 1,500,000 Advisor Shares
as part of the YBR  Agreement.  The  value of the  common  shares  to be  issued
($172,500)  was charged to  operations  in the  current  year and is included in

                                       4
<PAGE>

current  liabilities  as these shares have not been issued as of April 30, 2004.
YBR has  acknowledged  its obligations and agreed to cooperate in those actions.
See Item 12 "Certain Relationships and Related Transactions."

     The  Company  is  presently   exploring  several  business   opportunities,
inclusive of the possible  acquisition  of a new line of business,  which may or
may not be related to the development of medical devices.

     On December 12, 2003, the Company received a letter from the SEC's Division
of Investment  Management  inquiring as to the possible status of the Company as
an  unregistered  "investment  company"  within the  meaning  of the  Investment
Company Act of 1940 ("40 Act"). The Company  responded to this letter on January
28, 2004  explaining  that the Company may have  inadvertently  and  temporarily
fallen into the SEC's definition of an investment company because of the lack of
success with a licensing  agreements program that resulted in a disproportionate
percentage  of assets being  represented  by ownership in another  company.  The
Company's  response continued that by August 31, 2004, it intended to enter into
some form of reorganization with a private company or re-configure its assets to
remove itself from the  definition  of an investment  company under the '40 Act.
The  Company  intends  to take such  action  by  August  31,  2004.  However,  a
determination by the SEC that the Company is in fact an unregistered  investment
company could have a material adverse effect on the Company's business.

Sales and Marketing
-------------------

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

Manufacturing
-------------

     Management  will determine the appropriate  manufacturing  strategy for any
products which are developed in the future.

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
future medical  devices.  Many of those companies and academic  institutions are
well-established,  have substantially greater financial and other resources than

                                       5
<PAGE>

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 any new 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.

     The  Company  is  presently   exploring  several  business   opportunities,
inclusive of the possible  acquisition  of a new line of business,  which may or
may not be related to the medical device industry.

Government Regulation
---------------------

     Development  of medical  products  in the future may require the Company to
comply with FDA regulations  and be subject to various other FDA  record-keeping
requirements  and  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. If the FDA believes that
its  regulations  and other  guidelines  have not been followed,  it may seek to
implement extensive enforcement powers, which were 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.

     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.

                                       6
<PAGE>

     There is no required government  regulation on hydrogel related products at
this time. While hydrogels fall under the jurisdiction of the FDA, the hydrogels
HDS manufactures are exempt from the FDA approval and/or pre-market notification
requirements (this would include 510K, NDA and PMA submission).  With respect to
registering  the  manufacturing  facility with the FDA under the Code of Federal
Regulations,  21CFR820.1,  Scope:  Part A, it is stated that the regulation does
not apply to  manufacturers  of  component  parts of  finished  devices.  At the
current  time,  hydrogel  is  sold  as  a  component  part  to  various  medical
device/cosmetic  manufacturers.  If at  any  time  in  the  future  the  Company
manufactures products which would require such filings or registration, HDS will
take the appropriate steps to comply.

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.

     The Company owns the patent for the Hot Sack which  expires in 2008 and the
exclusive license to the Res-Q-Air, which has been issued a United States patent
which  expires in 2006.  The Company did not renew the license to the  Res-Q-Air
which expired in 2000. The Company is not presently  manufacturing  any of these
products.  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
SmartMedTM  which  was used on  products  in the past and may be used on  future
products.

                                       7
<PAGE>

     All other license  agreements for the  development of medical  devices,  in
which the Company held proprietary rights, have been terminated.

     There  are no  patents  related  to the  hydrogel  products.  HDS  holds  a
registered trademark on Aquamatrix TM which is used on its hydrogels.

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.

Employees
---------

     As of July 29th,  2004,  the Company  employed  one (1) full time person 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 September  1, 2001,  the Company  entered  into a sublease  with HDS for
office  space  on a month  to month  basis.  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. See "Certain Transactions."

                                       8
<PAGE>

     In addition,  in February  1997,  the Company  leased a 16,500  square foot
facility in Langhorne,  PA. The lease was for a term of seven years.  On January
25, 2002, the Company  entered into an Assignment and Amended and Restated Lease
Agreement  with HDS,  the  existing  sub-tenant  of the  premises  leased by the
Company at 2150 Cabot Blvd. West, Langhorne, PA. By such agreement, HDS accepted
an assignment of the Lease from the Company. Also, on such date, the building in
which the leasehold  premises are contained was purchased by 2150 Cabot,  LLC, a
related party of the Company.  Subsequent to the lease assignment,  the Landlord
of the premises and the Company  conducted  discussions  respecting  an outright
release of the Company from  contingent or other  obligations  of the Company to
the  Landlord  including,  but not limited to, the  obligation  of the Tenant to
restore the leasehold  premises to its original condition upon expiration of the
Lease.  The Landlord  granted a general  release to the Company from any and all
contingent or other obligations under the Lease in exchange for a release of any
claim for a return of its  security  deposit  in the  amount  of  $79,625.  This
forfeiture  of the deposit was charged to operations in the year ended April 30,
2002. Management determined, based on estimates, that the actual cost that would
be incurred to restore the  premises to its  condition  as existed  prior to the
Lease between the former Landlord and the Company would exceed the amount of the
deposit.

Item 3.  LEGAL PROCEEDINGS.
         ------------------

     The Company had 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  asserted  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 was also a defendant,  manipulated  secondary market

                                       9
<PAGE>

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 sought 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.

     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
o 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. In December  2002, the court
approved the  settlement.  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  final  court  review  of the
settlement.  The note was not paid when due.  Together with  interest,  there is
$89,928 due on the note. No default has been declared on the note.



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, 2004 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.


<TABLE>
<CAPTION>

Common Stock
------------                                       Quoted Bid Price
                                                   ----------------
                                                     High      Low
          2002 Calendar Year                         ----      ---
          ------------------
         <S>                                         <C>       <C>
          First Quarter                              .02       .01
          Second Quarter                             .02       .00
          Third Quarter                              .03       .00
          Fourth Quarter                             .01       .00

          2003 Calendar Year
          ------------------
          First Quarter                              .01       .00
          Second Quarter                             .01       .00
          Third Quarter                              .025      .005
          Fourth Quarter                             .09       .015

          2004 Calendar Year
          -------------------
          First Quarter                              .06       .015
          Second Quarter                             .05       .02
</TABLE>

     On July 30, 2004,  the closing price of the Common Stock as reported on the
OTC-Bullletin Board was $.03 On August 9, 2002, there were 664 holders of record
of common stock.

                                       11
<PAGE>

 Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
         ---------------------------------------------

Liquidity and Capital Resources

     The  Company's  ability to  continue  in the normal  course of  business is
dependent upon the success of future  operations.  The Company has had recurring
losses from operations which aggregate approximately $(10,915,000) cumulative to
April 30, 2004. At April 30, 2004, the Company has a net working capital deficit
of  approximately  $(978,000)  and  a  stockholders'  deficit  of  approximately
$(922,000),  which  raise  substantial  doubt about its ability to continue as a
going concern.  Management  has determined  that the Company is no longer in the
development  stage as it has ceased  development  of all products due to loss of
licenses and product marketability.

     The  Company's  statement  of cash flows for the year ended  April 30, 2004
reflects cash used in operating activities of approximately $64,000. This use of
cash is primarily attributable to general and administrative expenses consisting
of salaries,  rent,  insurance and other general expenses . The repayment of the
HDS credit line of approximately $54,000 was used to fund current operations.

     The Company  expects to incur  minimal  expenditures  over the next six (6)
months  for  general  and  administrative   expenses  consisting   primarily  of
maintaining an office for the Company,  to handle  administrative and accounting
functions  inclusive  of  required  SEC  reporting  and to retain  the CEO whose
function is to explore and evaluate future potential financial opportunities for
the Company.  As of November 1, 2003, the Company has ceased accruing additional
salary for the CEO and has been able to significantly  reduce rent expense.  The
Company's  management  does not believe that the Company's  cash on hand will be
sufficient  to fund  the  Company's  operations  for the  next  six (6)  months.
However,  management  continues to believe that the outstanding  amount due from
HDS, which was due September 30, 2002, of  approximately  $15,000 will be repaid
during  the  next  (6)  months.  Management  believes  that  collection  of this
receivable will fund the Company for approximately  (3) months.  During the year
ended  April 30,  2004,  HDS repaid  approximately  $54,000  of the  outstanding
receivable balance to the Company and has continued to make additional  payments
subsequent to April 30, 2004. Within the next three (3) months, the Company will
seek  alternative  methods to begin  generating  sufficient  revenues to support
operations  subsequent  to this  period.  These  alternatives  include : (a) the
potential  licensing  or  distribution  or new products or product  lines,  both
within  the  medical  industry  and  outside  the  medical  arena;  and  (b) the
acquisition of an operating entity or entities (subject to the Company's ability
to raise sufficient capital to complete such an acquisition).

                                       12
<PAGE>

     On December 12, 2003, the Company received a letter from the SEC's Division
of Investment  Management  inquiring as to the possible status of the Company as
an  unregistered  "investment  company"  within the  meaning  of the  Investment
Company Act of 1940 ("40 Act"). The Company  responded to this letter on January
28, 2004  explaining  that the Company may have  inadvertently  and  temporarily
fallen into the SEC's definition of an investment company because of the lack of
success with a licensing  agreements program that resulted in a disproportionate
percentage  of assets being  represented  by ownership in another  company.  The
Company's  response continued that by August 31, 2004, it intended to enter into
some form of  reorganization  with a private company or re- configure its assets
to remove itself from the definition of an investment company under the '40 Act.
The  Company  intends  to take such  action  by  August  31,  2004.  However,  a
determination by the SEC that the Company is in fact an unregistered  investment
company could have a material adverse effect on the Company's business.

     In the event the Company is unable to satisfy its capital needs through one
of the transactions described above,  management will pursue the sale of some or
all of the Company's  assets.  At this time,  the primary asset is the Company's
equity  position in Nesco. As of May 25, 2004, the date of the completion of the
Share  Exchange  Agreement  between  Nesco and the  Company,  the  Company  held
4,837,500  shares of Nesco common stock  representing  5.42% of the  outstanding
equity  securities  of Nesco.  Alternatively,  the  Company may need to consider
liquidating its investment in Nesco to meet its cash  requirements.  The Company
may be prohibited  from selling these  securities  for up to a year from May 25,
2004.

     Management  had entered  into a Share  Exchange  Agreement  with a party in
April 2004. See Item 12 "Certain  Relationships and Related Transactions." As of
the date hereof,  the party  involved in the  transaction  has not delivered the
required financing to the Company and the Company shall take all necessary steps
to  terminate  the  agreement.  At such  time  as the  Company  terminates  this
transaction,  the Company will issue an aggregate of 5,750,000  shares of common
stock,  4,250,000 to the party to this Share  Exchange  Agreement  and 1,500,000
Advisor  Shares as part of the  agreement.  The value of the common shares to be
issued  ($172,500) was charged to operations in the current year and is included
in current  liabilities  as these  shares  have not been  issued as of April 30,
2004.  Management is in discussions  with several other entities  regarding such
transactions,  however at this time no letter of intent or definitive  agreement
has been made. If such  agreements are formalized the Company will disclose this
information in the appropriate filings.

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 its other medical devices and
the start-up of HDS, a manufacturer of gel related products.  HDS was a majority
subsidiary in which the Company previously held a 10.3% voting share as of April
30, 2003.

     At April 30, 2004, the Company no longer holds any of these (7) licenses it
had purchased from Dr. Lloyd Marks. The final license for the development of the
self-shielding  needle  terminated  on January 22, 2001 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.

                                       13
<PAGE>

     In October 1999, the Company ceased sales on its other medical  devices due
to the relatively low level of sales, capital constraints and price increases by
the  manufacturer.  The Company has evaluated the  marketability of the licensed
technology  relating to these  products and has  determined  that these products
have no viable  marketability  at this time. 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 products.

     Effective May 25, 2004, Nesco Industries, Inc. ("Nesco"), a publicly traded
company listed on the Over The Counter  Bulletin Board Exchange (OTCC BB, Symbol
NESK),  HDS,  certain  stockholders  of Nesco and  certain  stockholders  of HDS
completed the transactions  contemplated by the Share Exchange Agreement,  dated
as of April 29,  2004  (the  "Exchange  Agreement"),  whereby  HDS has  become a
majority  owned  subsidiary of Nesco and, upon the completion of the exchange of
HDS securities for shares of Nesco common stock, the holders of HDS common stock
and debt will hold a majority interest of Nesco.

     In  addition  to the  exchange  of HDS common  stock and debt for shares of
Nesco common stock ("Nesco Common Stock"), Nesco agreed to dispose of all of its
subsidiaries,  convert  all of its  currently  outstanding  preferred  stock and
warrants into common stock and exchange certain of its indebtedness  into common
stock.

     Nesco had  intended to issue shares of its common stock in exchange for the
equity  securities  of HDS in certain  ratios as  provided  for in the  Exchange
Agreement. However, because Nesco did not have the required number of authorized
shares of common  stock to complete  the  exchange  on this basis,  it agreed to
issue  shares of its  newly  designated  Series B  Preferred  Stock  ("Preferred
Stock") for,  among others,  equity and debt of HDS as described in the Exchange
Agreement.  Upon filing of the  Certificate  of Amendment to the  Certificate of
Incorporation  to increase  the number of shares of common  stock which Nesco is
authorized  to issue,  each share of the Preferred  Stock will be  automatically
converted into shares of Nesco Common Stock.

     The Company now holds the equivalent of  approximately  4,837,500 shares or
5.42% of Nesco Common Stock.  Nesco was engaged primarily in asbestos  abatement
contracting but had ceased operations in 2003.

     The Company has not derived  significant  revenues  since its  inception in
March 1995. As a result of the Company's  start-up  expenses and  acquisition of
licenses and royalty  rights for the  products  that were being  developed,  the
Company has accumulated a deficit of approximately $10,915,000 through April 30,
2004. The Company is attempting to reduce operating losses through reductions in
operating  expenses  until  such time as it can  generate,  or raise  additional
capital for future operations.

                                       14
<PAGE>

     The net loss for the year ended April 30, 2004 was approximately ($629,000)
as compared to a net loss of  approximately  ($85,000)  for the year ended April
30, 2003.  There were no revenues in either of the two periods.  The increase in
the loss of approximately $544,000 for the year ended April 30, 2004 as compared
to the year ended April 30, 2003 is primarily  attributable to a decrease in the
recognition of income for the reversal of the reserve for  collectibility of the
HDS credit line of $59,000  which is lower due to the  decline in the  remaining
outstanding balance and the establishment of a reserve of approximately $296,000
which has been set-up by management for the  collectibility  of promissory notes
and  interest  which were due on July 1, 2003,  for the  purchase of  securities
offset by a reduction in overhead costs of approximately  $42,000 in the current
year  consisting  primarily  of  reductions  in  salaries,  rent and  insurance.
Although  the notes have been  extended for an  additional  three (3) year term,
management  believes  that their  collectibility  is uncertain at this time.  In
addition,  the  Company is  obligated  to issue  stock  valued at  approximately
$202,000  which has been  charged to  operations  in the current year to various
parties  in  connection  with a  certain  Asset  Purchase  Agreement  and made a
non-refundable  deposit of $25,000 to a party in connection with this agreement.
These costs were charged to operations in the current year. See Item 12 "Certain
Relationships and Related Transactions".

Plan of Operation
-----------------

     The Company has effectively  terminated all of its license agreements as of
January 22, 2001.  The Company  halted plans to complete the  development of the
Self-Shielding  Needle, the last remaining license,  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.

     The Company has a 5.42% investment, in its nonconsolidated affiliate Nesco,
which holds a majority  interest in HDS,  which is accounted  for under the cost
method. The manufacturing facility of HDS became fully operational in late 1997.

     Pursuant to a Share Exchange Agreement,  as amended,  initially dated as of
the 10th day of April,  2004 (the "YBR  Agreement"),  by and among the  Company,
Yellow Brick Road Ventures LLC, a New Jersey limited liability company ( "YBR"),
and Music Asset Corp.,  a Delaware  corporation  ("MAC") that was at the time of
execution of the Agreement a wholly owned  subsidiary of YBR, the Company agreed
to acquire from YBR,  100% of the  outstanding  stock of MAC in exchange for the
issuance by the Company of  22,473,214.29  shares of the Company's common stock,
subject to YBR providing certain financing to the Company in connection with the
exploitation  of the assets of MAC, which,  subsequent to the transaction  would
have become a wholly owned subsidiary of the Company.

     The assets of MAC  included  the  non-exclusive  rights to  distribute  and
exploit a music  library of  approximately  9,000  recordings  pursuant  to that
certain Asset Purchase  Agreement (the "Startek  Agreement") made the 7th day of
April 2004 by and between Startek  Entertainment Corp., a New Jersey Corporation
("Startek"),  Joe Venneri who is also President of Startek  ("Venneri") and MAC.
The Startek Agreement  provides that a sale of all of the shares of stock of MAC
to a third party shall not affect the  enforceability  of this agreement subject
to satisfying certain obligations, which the Company met, including the issuance
of 1,000,000 shares of common stock of the Company to Startek.  The value of the
common  shares  granted  ($30,000) was charged to operations in the current year
and is included in current  liabilities  as these shares have not been issued as
of April 30, 2004.

                                       15
<PAGE>


     The Asset Purchase  Agreement  provided that the acquisition price was Four
Million Dollars ($4,000,000) (the "Purchase Price"), payable One Million Dollars
($1,000,000)  on the date of the  closing,  and the  balance  of  Three  Million
Dollars  ($3,000,000)  in the form of a Senior  Secured  Obligation  payable  as
twenty five percent (25%) of Distributable  Net Income as specifically  defined.
As a condition to the sale,  Mr.  Venneri  agreed to work for MAC and receive an
employment agreement, in connection therewith.  The Company was also required to
make a non-refundable  deposit of $25,000 to Startek, which was funded by a loan
from an unrelated third party. In addition, an officer of the Company loaned the
Company $5,000 in connection with  additional fees related to this  transaction.
These loans are payable on demand and are non-interest bearing.

     As of the date hereof,  YBR has not  satisfied  its  obligation  to deliver
financing to the the  Company,  and Company has put YBR on notice that YBR is in
default of the YBR  Agreement  and  Company  shall take all  necessary  steps to
terminate the transaction as provided by the YBR agreement.  At such time as the
Company  terminates  this  transaction,  the Company  will issue an aggregate of
5,750,000 shares of common stock,  4,250,000 to YBR and 1,500,000 Advisor Shares
as part of the agreement.  The value of the common shares ($172,500) was charged
to  operations  in the current  year and is included in current  liabilities  as
these shares have not been issued as of April 30, 2004. YBR has acknowledged its
obligations and agreed to cooperate in those actions. The non refundable deposit
in the amount of $25,000 has been  charged to  operations  in the  current  year
ended April 30, 2004.

     No assurance  can be made with  respect to the  viability of the Company in
the long term.  The Company no longer  holds any  development  licenses  and has
determined that its current medical products have no viable  marketability.  The
Company is presently  exploring  several  alternatives,  inclusive of a possible
acquisition  of a new line of  business,  which may or may not be related to the
development of medical devices or the potential licensing or distribution of new
products or product  lines both within the medical  industry  and outside of the
medical arena. Management anticipates that to meet current operating costs would
require raising  additional  funds from either the debt or equity markets in the
next  three  (3)  months.  Alternatively,  the  Company  may  need  to  consider
liquidating its investment in Nesco to meet its cash  requirements.  The Company
may be prohibited  from selling these  securities  for up to a year from May 25,
2004.  No  assurances  can be made as to the  success of these  capital  raising
alternatives.

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

     See financial  statements  following  Item 14 of this Annual Report on Form
10-KSB.

Item 8.  CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE.
         -------------------------------------------

     None
                                       16
<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  will  serve  until  their  successors  have  been  duly  elected  and
qualified.

        Name            Age                    Position Held
        ----            ---                    -------------


Matthew L. Harriton      40        President, Chief Executive Officer,
                                   Chief Financial Officer  and Director

Dr. Daniel Durchslag     59        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., and Nesco Industries,  Inc. in which the Company
has a 5.42% minority  voting  interest,  since May 2004. HDS is a majority owned
subsidiary  of Nesco.  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  University  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.


     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.

     The directors will serve until their  successors have been duly elected and
qualified.

                                       17
<PAGE>

Item 10.  EXECUTIVE COMPENSATION
          ----------------------
                                            SUMMARY COMPENSATION TABLE
                                            --------------------------
<TABLE>
<CAPTION>
                                                                                      Long Term Compensation
                                                                                      ----------------------

                                                Annual Compensation               Awards             Payouts
                                            ----------------------------         -------         ----------------

         (a)                   (b)    (c)        (d)          (e)           (f)       (g)          (h)         (i)


                                                                         Restricted
                                                             Other          Stock                  LTIP        All
                                                             Annual         Awards   Options/     Payouts     Other
Name and Principal Position   Year  Salary($)  Bonus($)  Compensation($)     ($)      SARs(#)      ($)      Compensation
---------------------------   ----  ---------  -------   ---------------- --------   -------      ------    ------------
<S>                           <C>   <C>         <C>           <C>             <C>        <C>        <C>         <C>
Matthew L. Harriton, CEO      2004  $30,000     $ -0-         0               ---        0          0           0
                              2003  $60,000     $ -0-         0               ---        0          0           0
                              2002  $60,000     $ -0-         0               ---        0          0           0
____________________
</TABLE>

                                       OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                       -------------------------------------
<TABLE>
<CAPTION>

       (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
---------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                       <C>                              <C>                <C>
Matthew Harriton               0                         0                                 N/A                N/A
</TABLE>

                                        AGGREGATED OPTION/SARs EXERCISES IN
                                            LAST FISCAL YEAR AND FY-END
                                                 OPTIONS/SAR VALUES
                                                 ------------------
<TABLE>
<CAPTION>

    (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
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                      <C>                    <C>                          <C>
Matthew Harriton               0                        $ 0                   -0-0-                        -0-/-0-
</TABLE>

                                       18
<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,  2002,  and 2003 this
agreement  was extended for  successive  (1) year terms 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.

     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.

                                       19
<PAGE>

     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 July, 2004 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.

     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.

                                       20
<PAGE>


Item 11. SECURITY OWNERSHIP OF CERTAIN
         BENEFICIAL OWNERS AND MANAGEMENT.
         --------------------------------

     The  following  table sets forth certain  information,  as of July 30, 2004
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)
-------------------                 -----------      ------     ------------------        --------
<S>                                 <C>                <C>           <C>                     <C>
M.D. Funding, Inc.(1)                   --             --            6,000,000               30.4
 5 Old Woods Drive
Harrison, NY 10528

Daniel Durchslag                      250,000          1.8             ---                    1.3
9400 Brighton Way
Suite 402
Beverly Hills, CA 90210

Matthew L. Harriton                 1,250,000          9.1             ---                    6.3
305 Madison Avenue
New York, NY  10165

Startek Entertainment Corp.(3)      1,000,000          7.3             ---                    5.1
336 East Pleasant Grove Road
Jackson, NJ 08527

Advisor Shares(4)                   1,500,000         10.9             ---                    7.6
Various

YBR (4)                             4,250,000         30.9             ---                   21.5
305 Madison Avenue
New York, NY  10165

All directors and officer           1,500,000         10.9             ---                    7.6
as a group (2 persons)
<FN>

     (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.


     (3)  Startek  Entertainment  is a  corporation  that was granted  1,000,000
          shares  in April  2004 of  Common  Stock in  connection  with an asset
          purchase  agreement  with  MAC.  MAC was a party  to a  certain  Share
          Exchange  Agreement  between the Company and YBR. See Item 12 "Certain
          Relationships  and  Transactions".  The  value  of the  common  shares
          granted ($30,000) was charged to operations in the current year and is
          included in current  liabilities  as these shares have not been issued
          as of April 30, 2004.

     (4)  YBR and certain advisors were granted  4,250,000 and 1,500,000 shares,
          respectively,  of Common  Stock in  connection  with a Share  Exchange
          Agreement  with the Company.  See Item 12 "Certain  Relationships  and
          Transactions".  The value of the common shares to be issued ($172,500)
          was  charged to  operations  in the  current  year and is  included in
          current  lialilities  as these shares have not been issued as of April
          30, 2004.
</FN>
</TABLE>
                                       21
<PAGE>


Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
          ----------------------------------------------

     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, bearing
interest at 8%, 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,  no further  cash  advances  were
allowed.  In February 2001, the credit line was again extended through September
30, 2002,  under the same terms as the prior  extension.  At April 30, 2003, the
outstanding balance on the line of credit was approximately  $69,000. No further
extension  has been granted.  HDS has  continued to make payments  subsequent to
April 30, 2004.

     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.
On January 25,  2002,  the Company  entered into an  Assignment  and Amended and
Restated  Lease  Agreement  with HDS,  the existing  sub-tenant  of the premises
leased  by the  Company  at  2150  Cabot  Blvd.  West,  Langhorne,  PA.  By such
agreement,  HDS accepted an assignment  of the Lease from the Company.  Also, on
such date,  the  building in which the  leasehold  premises  are  contained  was
purchased by 2150 Cabot, LLC, a related party of the Company.  2150 Cabot LLC is
wholly owned by a  stockholder  of HDS who is also a related party of the CEO of
the Company.  Subsequent to the lease  assignment,  the Landlord of the premises
and the Company  conducted  discussions  respecting  an outright  release of the
Company  from  contingent  or other  obligations  of the Company to the Landlord
including,  but not  limited  to, the  obligation  of the Tenant to restore  the
leasehold  premises to its original  condition upon expiration of the Lease. The
Landlord granted a general release to the Company from any and all contingent or
other  obligations  under the Lease in exchange for a release of any claim for a
return of its security deposit in the amount of $79,625.  This forfeiture of the
deposit was charged to operations  in the year ended April 30, 2002.  Management
determined,  based on estimates,  that the actual cost that would be incurred to
restore the premises to its  condition as existed prior to the Lease between the
former Landlord and the Company would exceed the amount of the deposit.

     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  Fabrikant  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.

                                       22
<PAGE>

     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 were due on July
1, 2003,  with  interest  at 8% per annum and are  secured  by the common  stock
purchased.  On July 1, 2003, the notes were extended for an additional three (3)
year period under the same terms and conditions as the original notes.

     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 29, 2004, the holders of the preferred  stock held
42.9% 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 September  1, 2001,  the Company  entered  into a sublease  with HDS for
office  space on a month to month  basis at the rental rate of $2,000 per month.
As of November  1, 2003,  the  monthly  rent was reduced to $300 per month.  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.

     Effective May 25, 2004, Nesco Industries, Inc. ("Nesco"), a publicly traded
company listed on the Over The Counter  Bulletin Board Exchange (OTCC BB, Symbol
NESK),  HDS,  certain  stockholders  of Nesco and  certain  stockholders  of HDS
completed the transactions  contemplated by the Share Exchange Agreement,  dated
as of April 29,  2004  (the  "Exchange  Agreement"),  whereby  HDS has  become a
majority  owned  subsidiary of Nesco and, upon the completion of the exchange of
HDS securities for shares of Nesco common stock, the holders of HDS common stock
and debt will hold a majority interest of Nesco.

     In  addition  to the  exchange  of HDS common  stock and debt for shares of
Nesco common stock ("Nesco Common Stock"), Nesco agreed to dispose of all of its
subsidiaries,  convert  all of its  currently  outstanding  preferred  stock and
warrants into common stock and exchange certain of its indebtedness  into common
stock.

     The transactions  contemplated by the Exchange Agreement are intended to be
a tax free  exchange  pursuant to Section 368 of the  Internal  Revenue  Code of
1986.

     Nesco had  intended to issue shares of its common stock in exchange for the
equity  securities  of HDS in certain  ratios as  provided  for in the  Exchange
Agreement. However, because Nesco did not have the required number of authorized
shares of common  stock to complete  the  exchange  on this basis,  it agreed to
issue  shares of its  newly  designated  Series B  Preferred  Stock  ("Preferred
Stock") for,  among others,  equity and debt of HDS as described in the Exchange
Agreement.  Upon filing of the  Certificate  of Amendment to the  Certificate of
Incorporation  to increase  the number of shares of common  stock which Nesco is
authorized  to issue,  each share of the Preferred  Stock will be  automatically
converted into shares of Nesco Common Stock.

                                       23
<PAGE>

     The Company now holds the equivalent of  approximately  4,837,500 shares or
5.42% of Nesco Common Stock.

     The HDS  Shareholders  who  participated in the exchange  included  Matthew
Harriton,  the Chief Executive  Officer and a director of HDS, and the President
and a Director of Embryo.  Mr.  Harriton was the owner of 225,000  shares of HDS
Common Stock.

     As part of the  Exchange  Agreement,  Mr.  Harriton has joined the board of
directors of Nesco and has entered into an Employment  Agreement for a term of 3
years.

     Mr. Harriton was further granted an option to purchase  5,000,000 shares of
Nesco  Common at the  Applicable  Trading  Price (a defined term in the Exchange
Agreement) per share (the "Harriton Option"). The Harriton Option is exercisable
for a period of five (5) years  commencing  on the Closing  Date (the  "Exercise
Period") and is immediately  exercisable for the purchase of 2,000,000 shares of
Nesco  Common and  exercisable  as to an  additional  1,000,000  shares of Nesco
Common  commencing on each of the first,  second and third  anniversaries of the
Closing Date,  respectively,  provided that Harriton  remains a consultant to or
employee of Nesco or any subsidiary of Nesco,  but if Nesco  exercises its right
to terminate the  Employment  Agreement  with Harriton after the initial term of
that  agreement,  without  specifying  reasons for  termination  that constitute
grounds for termination for "cause" as defined in the Employment Agreement,  the
Harriton Option shall become immediately exercisable as to all 5,000,000 shares.
Following  termination of the Employment  Agreement for any reason, the Harriton
Option shall  thereafter  remain  exercisable  for the  balance,  if any, of the
Exercise  Period  for the same  number of shares of Nesco  Common  for which the
Harriton Option was exercisable  upon  termination of the Employment  Agreement,
subject to the provisions of the immediately preceding sentence.

     Pursuant to a Share Exchange Agreement,  as amended,  initially dated as of
the 10th day of April,  2004 (the "YBR  Agreement"),  by and among the  Company,
Yellow Brick Road Ventures LLC, a New Jersey limited liability company ( "YBR"),
and Music Asset Corp.,  a Delaware  corporation  ("MAC") that was at the time of
execution of the Agreement a wholly owned  subsidiary of YBR, the Company agreed
to acquire from YBR,  100% of the  outstanding  stock of MAC in exchange for the
issuance by the Company of  22,473,214.29  shares of the Company's common stock,
subject to YBR providing certain financing to the Company in connection with the
exploitation  of the assets of MAC, which,  subsequent to the transaction  would
have  become  a  wholly  owned  subsidiary  of  the  Company.  The  transactions
contemplated  by the  YBR  Agreement  are  intended  to be a  tax-free  exchange
pursuant to 368 of the Internal Revenue Code of 1986.

     The assets of MAC  included  the  non-exclusive  rights to  distribute  and
exploit a music  library of  approximately  9,000  recordings  pursuant  to that
certain Asset Purchase  Agreement (the "Startek  Agreement") made the 7th day of
April 2004 by and between Startek  Entertainment Corp., a New Jersey Corporation
("Startek"),  Joe Venneri who is also President of Startek  ("Venneri") and MAC.
The Startek Agreement  provides that a sale of all of the shares of stock of MAC
to a third party shall not affect the  enforceability  of this agreement subject
to satisfying certain obligations, which the Company met, including the issuance
of  1,000,000  shares of common  stock of Company to  Startek.  The value of the
common  shares  granted  ($30,000) was charged to operations in the current year
and is included in current  liabilities  as these shares have not been issued as
of April 30, 2004.

     The Asset Purchase  Agreement  provided that the acquisition price was Four
Million Dollars ($4,000,000) (the "Purchase Price"), payable One Million Dollars
($1,000,000)  on the date of the  closing,  and the  balance  of  Three  Million
Dollars  ($3,000,000)  in the form of a Senior  Secured  Obligation  payable  as
twenty five percent (25%) of Distributable  Net Income as specifically  defined.
As a condition to the sale,  Mr.  Venneri  agreed to work for MAC and receive an
employment agreement, in connection therewith.  The Company was also required to
make a non-refundable  deposit of $25,000 to Startek, which was funded by a loan
from an unrelated third party.


                                       24
<PAGE>

     MAC also controlled rights in letter of intent being negotiated with Castle
Hill Films,  Dream LLC and certain other parties for the acquisition of a Motion
Picture Film Library. MAC represented in the YBR Agreement that it had disclosed
this Share Exchange  Agreement and that those parties have agreed to continue to
negotiate in good faith with the intention of proceeding  with the  acquisition.
At the time of execution of the Share  Exchange  Agreement,  the purchase  price
being  discussed  was at a multiple of seven times the  average  yearly  pre-tax
profits  from the library for the past 2 years.  The parties had  estimated  the
final purchase price would be between nine and ten million dollars.

     As of the date hereof,  YBR has not  satisfied  its  obligation  to deliver
financing to the  Company,  and the Company has put YBR on notice that YBR is in
default of the YBR  Agreement  and  Company  shall take all  necessary  steps to
terminate the transaction as provided by the YBR Agreement.  At such time as the
Company  terminates  this  transaction,  the Company  will issue an aggregate of
5,750,000 shares of common stock,  4,250,000 to YBR and 1,500,000 Advisor Shares
as part of the YBR  Agreement.  The  value of the  common  shares  to be  issued
($172,500)  was charged to  operations  in the  current  year and is included in
current  liabilities  as these shares have not been issued as of April 30, 2004.
YBR has acknowledged its obligations and agreed to cooperate in those actions.



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 Registered Public Accounting Firm                  F-1

Balance sheet as of April 30, 2004                                       F-2

Statements of operations for the years ended
  April 30, 2004 and 2003                                                F-3

Statements of stockholders' equity (deficit) for the years
  ended April 30, 2004 and 2003                                          F-4

Statements of cash flows for the years ended
  April 30, 2004 and 2003                                                F-5

Notes to financial statements                                         F-6 - F-16


                                       25
<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. `

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

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.

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


10.38**** 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 .

10.42#### Promissory Note between Sterling Foster Securities Litigation Fund and
     the Company dated June 26, 2001.

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.

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

31   Certifications

32   Certification  of the Chief Executive  Officer and Chief Financial  Officer
     pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002.

                                       26
<PAGE>
*    Incorporated by reference to the Company's  Registration  Statement on Form
     SB-2 No. 33-92366.

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

+    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.

###  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.

**** 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.

#### Incorporated by reference to the Company's Form 10KSB dated April 30, 2001.

(B)  Reports on Form 8-K.

     None.

Item 14. CONTROLS AND PROCEDURES
         -----------------------


     (a)  Evaluation  of  disclosure  controls  and  procedures.  Based  on  his
evaluation of the Company's  disclosure  controls and  procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of a
date within 90 days of the filing date of this Annual Report on Form 10-KSB, our
chief  executive  officer and chief  financial  officer has  concluded  that our
disclosure  controls and procedures are designed to ensure that the  information
we are  required to disclose in the reports we file or submit under the Exchange
Act is recorded,  processed,  summarized  and  reported  within the time periods
specified in the SEC's rules and forms and are operating in an effective manner.

     (b) Changes in internal controls.  There were no significant changes in our
internal  controls or in other  factors  that could  significantly  affect these
controls subsequent to the date of their most recent evaluation.

                                       27
<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 13, 2004


                         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 13, 2004
Matthew L. Harriton      Chief Financial Officer,
                         Principal Accounting Officer
                         and Director


/s/ Daniel Durchslag     Director                     August 13, 2004
Daniel Durchslag


<PAGE>
                         EMBRYO DEVELOPMENT CORPORATION
                         ------------------------------
                               REPORT ON AUDIT OF
                               ------------------
                              FINANCIAL STATEMENTS
                              --------------------




Report of Independent Registered Public Accounting Firm                    F-1

Balance sheet                                                              F-2

Statements of operations                                                   F-3

Statements of stockholders' equity (deficit)                               F-4

Statements of cash flows                                                   F-5

Notes to financial statements                                           F-6-F-16

<PAGE>

             Report of Independent Registered Public Accounting Firm


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  as of April 30, 2004,  and the related  statements  of  operations,
stockholders'  equity  (deficit),  and cash flows for the years  ended April 30,
2004 and April 30, 2003. 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 the  standards of the Public
Company Accounting Oversight Board (United States). 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 as of April 30, 2004, and the results of its operations and its cash
flows for the years ended April 30, 2004 and April 30, 2003, in conformity  with
accounting principles generally accepted in the United States of America.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company's ability to continue in the normal course of
business is  dependent  upon the success of future  operations.  The Company has
significant  cumulative  losses and has a working  capital  deficit  and has not
generated  any  revenue in the last two fiscal  years  ended  April 30, 2004 and
April 30, 2003.  These conditions  raise  substantial  doubt about the Company's
ability to continue  as a going  concern.  Management's  plans  regarding  those
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
July 23, 2004










                               F-1
<PAGE>

EMBRYO DEVELOPMENT CORPORATION


BALANCE SHEET AS OF APRIL 30, 2004.


<TABLE>
<CAPTION>
<S>                                                                  <C>
Assets:
Current Assets:
  Cash                                                               $        94
                                                                     -----------
  Total Current Assets                                                        94
                                                                     -----------
Property and Equipment -  Net of Accumulated Depreciation of $38,838       2,534
                                                                     -----------

Investment in Unconsolidated Investee - At Cost                           39,026
                                                                     -----------
Other Asset:
  Due from Unconsolidated Investee                                        14,876
                                                                     -----------

  Total Assets                                                       $    56,530
                                                                     ===========
Liabilities and Stockholders' Deficit:
Current Liabilities:
  Accounts Payable and Accrued Expenses                              $   272,072
     Notes and Interest Payable                                          124,928
  Royalty Payable                                                        379,000
   Costs of Failed Merger                                                202,500
                                                                     -----------
  Total Current Liabilities                                              978,500
                                                                     -----------


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

  Accumulated Deficit                                                (10,914,537)
                                                                     -----------

  Total Stockholders' Deficit                                           (921,970)
                                                                     -----------
  Total Liabilities and Stockholders' Deficit                        $    56,530
                                                                     ===========
</TABLE>

                                 F-2

See Accompanying Notes to Financial Statements.
<PAGE>


EMBRYO DEVELOPMENT CORPORATION


STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                      Years ended
                                                      -----------
                                                        April 30,
                                                        ---------
                                              2 0 0 4              2 0 0 3
                                              -------              -------

 <S>                                         <C>                  <C>
 (Income) expenses:
  General, Selling and Administrative        $ 146,232            $187,679
  Interest Income - Related Party             ( 11,256)           ( 12,445)
  Interest and Other                             5,584               3,409
   Reserve for Collectibility of
      Promissory Notes and Interest            295,819                -
  Adjustment for Collectibility of Amount Due
   from Unconsolidated Investee               ( 34,633)           ( 93,578)
   Costs of Failed Merger                      227,500                -
                                            ----------           ---------

  Total (income) expenses                      629,246              85,065
                                            ----------           ---------
    Net Loss                                $( 629,246)          $( 85,065)
                                            ==========           =========

  Basic and Diluted Net Loss Per Common
     Share                                  $     (.09)          $    (.01)
                                            ==========           =========
  Weighted Average Number of Common
       Shares Used in Computing Basic and
       Diluted Loss Per Common Share         7,058,014           6,995,000
                                            ==========           =========
</TABLE>



                                 F-3

See Accompanying Notes to Financial Statements.
<PAGE>



 EMBRYO DEVELOPMENT CORPORATION


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


                                                           Additional                   Notes and         Total
                                                           ----------                   ---------         -----
                        Common Stock     Preferred Stock    Paid-in     Accumulated     Interest       Stockholders'
                     -----------------  -----------------  ----------   -----------    ----------      -------------
                     Shares     Amount  Shares     Amount   Capital        Deficit     Receivable        Deficit
                     ------     ------  ------     ------  ----------   -----------    ----------      -------------
<S>                  <C>         <C>    <C>         <C>    <C>          <C>             <C>            <C>
Balance -
 April 30, 2002      6,995,000   $ 700  6,000,000   $ 600  $ 9,991,267  $(10,200,226)   $(263,552)      $(471,211)

Interest on
 Notes Receivable                                                                         (16,133)       ( 16,133)

Net Loss                                                                     (85,065)                    ( 85,065)
------------------------------------------------------------------------------------------------------------------------------------
Balance -
 April 30, 2003      6,995,000     700  6,000,000     600    9,991,267   (10,285,291)    (279,685)       (572,409)

Interest on
 Notes Receivable                                                                         (16,134)        (16,134)

Reserve for
 Notes Receivable                                                                         295,819         295,819

Net Loss                                                                   ( 629,246)                    (629,246)
------------------------------------------------------------------------------------------------------------------------------------
Balance -
 April 30, 2004      6,995,000   $ 700  6,000,000    600    $9,991,267  $(10,914,537)        -          $(921,970)
                     =========   =====  =========    ===    ==========  ============    =========       =========
</TABLE>
                                       F-4

See Accompanying Notes to Financial Statements.

<PAGE>
EMBRYO DEVELOPMENT CORPORATION


STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                               Years ended
                                                                               -----------
                                                                                April 30,
                                                                                ---------
                                                                        2 0 0 4           2 0 0 3
                                                                        -------           -------
<S>                                                                    <C>               <C>
Operating Activities:
   Net Loss                                                            $(629,246)        $(85,065)
  Adjustments to Reconcile Net Loss to Net
     Cash Used in Operating Activities:
     Depreciation and Amortization                                         1,634            2,799
      Costs of Failed Merger                                             227,500             --
     Adjustment for Collectibility of Amount Due from
       Unconsolidated Investee                                          ( 34,633)        ( 93,578)
      Reserve for Collectibility of Promissory Notes
        and Interest
                                                                         295,819             --
 Changes in Assets and Liabilities:
     [Increase] Decrease:
     Interest Receivable                                                 (16,134)         (16,133)
     Prepaid Expenses and Other Current Assets                            11,361           (2,232)

   Increase [Decrease]:
       Accounts Payable and Accrued Expenses                              79,286            6,149
                                                                      ----------        ---------
       Net Cash - Operating Activities                                  ( 64,413)       ( 188,060)
                                                                       ----------        ---------
Investing Activities:
   Repayment of Loans from Unconsolidated Investee                        54,391          187,154
     Payment of Acquisition Deposit                                      (25,000)            --
                                                                      ----------        ---------
       Net Cash - Investing Activities                                    29,391          187,154
                                                                      ----------        ---------
Financing Activities:
   Proceeds from Loan from Officer                                         5,000             --
   Proceeds from Note Payable - Acquisition                               30,000             --
                                                                      ----------        ---------
       Net Cash - Financing Activities                                    35,000             --
                                                                      ----------        ---------

Net Increase [Decrease] in Cash and Cash
     Equivalents                                                            ( 22)            (906)

Cash and Cash Equivalents - Beginning of Period                              116            1,022
                                                                      ----------        ---------
Cash and Cash Equivalents - End of Period                             $       94        $     116
                                                                      ==========        =========
</TABLE>

                                       F-5

See Accompanying Notes to Financial Statements.
<PAGE>


EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS


[1] Organization and Nature of Operations

Embryo Development  Corporation [the "Company"] is a Delaware  Corporation which
was  formed  in  1995  to  develop,  acquire,  manufacture  and  market  various
bio-medical devices throughout the United States.

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,  and  undertaking  preliminary
activities for the commencement of operations. All of the license agreements for
the  development of various  medical  devices,  inclusive of the  Self-Sheilding
Needle, have effectively been terminated and the Company has determined that the
remaining  assets it had purchased  relating to medical  products have no viable
marketability.  As a result,  management has  determined  that the Company is no
longer in the development stage.

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  $10,915,000,  has a working capital
deficit of approximately  $978,000,  and utilized cash of approximately  $64,000
for operating  activities  for the year ended April 30, 2004.  In addition,  the
Company has not  generated  any revenue in the last two fiscal years ended April
30,  2004 and  April 30,  2003.  Management  recognizes  that the  Company  must
generate revenue to achieve profitable  operations and to meet current operating
costs.  Management  anticipates  that to meet these needs will  require  raising
additional  funds  from  either  the debt or  equity  markets.  The  Company  is
presently exploring several alternatives,  inclusive of the possible acquisition
of a new line of business, which may or may not be related to the development of
medical devices.

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 on. HDS is engaged in the  manufacture,  marketing,  selling and
distribution   of  hydrogel,   an  aqueous   polymer-based   radiation   ionized
medical/consumer  product. The Company held 11.4% of the common stock of HDS and
10.3% of total voting shares.

Effective May 25,2004, Nesco Industries,Inc.("Nesco"), a publicly traded company
listed on the Over The Counter  Bulletin  Board Exchange (OTCC BB, Symbol NESK),
HDS, certain stockholders of Nesco and certain stockholders of HDS completed the
transactions contemplated by the Share Exchange Agreement, dated as of April 29,
2004  (the  "Exchange  Agreement"),  whereby  HDS has  become a  majority  owned
subsidiary of Nesco and, upon the  completion of the exchange of HDS  securities
for shares of Nesco common stock,  the holders of HDS common stock and debt will
hold a majority interest of Nesco..

In  addition to the  exchange  of HDS common  stock and debt for shares of Nesco
common  stock  ("Nesco  Common  Stock"),  Nesco  agreed to dispose of all of its
subsidiaries,  convert  all of its  currently  outstanding  preferred  stock and
warrants into common stock and exchange certain of its indebtedness  into common
stock.

                                      F-6
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #2

[1] Organization and Nature of Operations [Continued]

Nesco had  intended  to issue  shares of its common  stock in  exchange  for the
equity  securities  of HDS in certain  ratios as  provided  for in the  Exchange
Agreement. However, because Nesco did not have the required number of authorized
shares of common  stock to complete  the  exchange  on this basis,  it agreed to
issue  shares of its  newly  designated  Series B  Preferred  Stock  ("Preferred
Stock") for,  among others,  equity and debt of HDS as described in the Exchange
Agreement.  Upon filing of the  Certificate  of Amendment to the  Certificate of
Incorporation  to increase  the number of shares of common  stock which Nesco is
authorized  to issue,  each share of the Preferred  Stock will be  automatically
converted into shares of Nesco Common Stock.

The Company will hold the equivalent of approximately  4,837,500 shares or 5.42%
of Nesco  Common  Stock.  Nesco was  engaged  primarily  in  asbestos  abatement
contracting but had ceased operations in 2003.

The Company expects to incur minimal  expenditures  over the next six (6) months
for general and administrative  expenses consisting  primarily of maintaining an
office  for the  Company,  to handle  administrative  and  accounting  functions
inclusive of required SEC reporting  and to retain the CEO whose  function is to
explore and evaluate future potential  financial  opportunities for the Company.
As of November 1, 2003, the Company has ceased  accruing  additional  salary for
the CEO and has been able to  significantly  reduce rent expense.  The Company's
management  does not believe that the Company's  cash on hand will be sufficient
to  fund  the  Company's  operations  for the  next  six  (6)  months.  However,
management  continues to believe that the outstanding amount due from HDS, which
was due September 30, 2002, of  approximately  $15,000 will be repaid during the
next (6) months.  Management  believes that  collection of this  receivable will
fund the Company for approximately  (3) months.  During the year ended April 30,
2004, HDS repaid approximately $54,000 of the outstanding  receivable balance to
the Company and has continued to make  additional  payments  subsequent to April
30, 2004.  Within the next three (3) months,  the Company will seek  alternative
methods to begin generating sufficient revenues to support operations subsequent
to this period.  These  alternatives  include : (a) the  potential  licensing or
distribution or new products or product lines,  both within the medical industry
and outside the medical arena; and (b) the acquisition of an operating entity or
entities  (subject  to the  Company's  ability  to raise  sufficient  capital to
complete such an acquisition).

     On December 12, 2003, the Company received a letter from the SEC's Division
of Investment  Management  inquiring as to the possible status of the Company as
an  unregistered  "investment  company"  within the  meaning  of the  Investment
Company Act of 1940 ("40 Act"). The Company  responded to this letter on January
28, 2004  explaining  that the Company may have  inadvertently  and  temporarily
fallen into the SEC's definition of an investment company because of the lack of
success with a licensing  agreements program that resulted in a disproportionate
percentage  of assets being  represented  by ownership in another  company.  The
Company's  response continued that by August 31, 2004, it intended to enter into
some form of reorganization with a private company or re-configure its assets to
remove itself from the  definition  of an investment  company under the '40 Act.
The  Company  intends  to take such  action  by  August  31,  2004.  However,  a
determination by the SEC that the Company is in fact an unregistered  investment
company could have a material adverse effect on the Company's business.

In the event the Company is unable to satisfy its capital  needs  through one of
the transactions described above, management will pursue the sale of some or all
of the Company's assets. After the Exchange Agreement,  the primary asset is the
Company's equity position in Nesco.  After the Exchange  Agreement,  the Company
will hold  4,837,500  shares of Nesco  common  stock  representing  5.42% of the
outstanding equity securities of Nesco.  Alternatively,  the Company may need to
consider liquidating its investment in Nesco to meet its cash requirements.  The
Company may be prohibited  from selling these  securities  for up to a year from
May 25, 2004.


                                F-7
<PAGE>

EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #3

[1] Organization and Nature of Operations [Continued]

Management had entered into a Share Exchange Agreement in April 2004 (see Note 4
).  As of the  date  hereof,  the  party  involved  in the  transaction  has not
delivered  the required  financing to the Company and the Company shall take all
necessary  steps to terminate  the  transaction  as provided by that  agreement.
Management  is  in  discussions  with  several  other  entities  regarding  such
transactions,  however at this time no letter of intent or definitive  agreement
has been made. If such  agreements are formalized the Company will disclose this
information in the appropriate filings.

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

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, 2004 and 2003  amounted to
$1,634 and $2,799, 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,
2004,  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.

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.

Impairment  - Certain  long-term  assets 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.  144,  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets."  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.

                                      F-8
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #4

[2] Summary of Significant Accounting Policies [Continued]

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.

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.  The weighted  average number of common shares
outstanding gives effect to the 1,000,000 shares of common stock to be issued as
of April 30, 2004 in  connection  with a Share  Exchange  Agreement but does not
give effect to the 5,750,000  shares to be issued upon  termination of the Share
Exchange Agreement (see Note 4).

Stock-Based  Compensation  - In  December  2002,  the FASB  issued SFAS No. 148,
"Accounting for  Stock-Based  Compensation - Transition and  Disclosure,"  which
amended SFAS No. 123, "Accounting for Stock-Based  Compensation." This Statement
provides  alternative  methods of transition for a voluntary  change to the fair
value based method of accounting for  stock-based  compensation.  It also amends
the disclosure  provision to require more prominent disclosure about the effects
on reported net income (loss) of an entity's  accounting  policy  decisions with
respect to stock- based employee compensation. The provisions of this Statements
are to be applied to financial statements for fiscal years ending after December
15, 2002. As permitted by the Statement,  the Company does not plan to adopt the
fair value  recognition  provisions of SFAS No. 123 at this time.  However,  the
Company has adopted the  disclosure  provisions  of the Statement as of December
31, 2002.

The Company  accounts  for its  stock-based  employee  compensation  plans under
Accounting Principles Board Opinion No. 25, under which no compensation cost has
been recognized in the accompanying statements of operations, as no options were
granted in the respective  periods.  As of April 30, 2004 and 2003 there were no
stock options or warrants outstanding.

New  Accounting  Pronouncements  - In April 2003,  the FASB issued SFAS No. 149,
"Amendment of Statement 133 on Derivative  Instruments and Hedging  Activities",
SFAS No.  149  amends and  clarifies  financial  accounting  and  reporting  for
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts and for hedging  activities under SFAS No. 133. The Statement is
generally  effective for contracts  entered into or modified after June 30, 2003
and for  hedging  relationships  designated  after  June 30,  2003 and should be
applied  prospectively.  The  implementation  of this  standard  did not  have a
material impact on the Company's financial position or results of operations.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
requires  certain  freestanding   financial   instruments,   such  as  mandatory
redeemable  preferred  stock,  to be  measured at fair value and  classified  as
liabilities.  The  provisions  of SFAS No. 150 are  effective  for fiscal  years
beginning  after  July 1,  2003.  The  implementation  of this  standard  is not
expected  to have a  material  impact on the  Company's  financial  position  or
results of operations.

                                      F-9

<PAGE>


EMBRYO  DEVELOPMENT  CORPORATION  NOTES TO FINANCIAL
STATEMENTS, Sheet #5


[3] Investment in HDS

As of April 30, 2004,  the Company  held  approximately  11.4%  ownership of the
common  stock of HDS and  10.3% of total  voting  shares.  This  investment  was
reported under the cost method.  Subsequent to April 30, 2004,  this  investment
was exchanged for shares of Nesco Common Stock (See Note 12).

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, 2004, borrowings under the revolver approximated $15,000
including  accrued  interest.  The original  line of credit,  which was extended
several times, expired on September 30, 2002. The terms of the initial extension
in 1999  prohibited any future cash advances on the credit line and provided 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.
Approximately  $54,000 and $187,000 of the  original  obligation  was  collected
during the years ended April 30, 2004 and April 30, 2003, respectively.  HDS has
continued to make additional payments subsequent to April 30, 2004.

In February 1997, HDS entered into a seven-year sublease with the Company, which
provided for minimum monthly rental payments of $9,625 and was to expire in 2004
[See Note 8C]. On January 25, 2002,  the Company  entered into an Assignment and
Amended and Restated Lease  Agreement  with HDS, the existing  sub-tenant of the
premises leased by the Company at 2150 Cabot Boulevard West,  Langhorne,  PA. By
such  agreement,  HDS  accepted an  assignment  from the lease from the Company.
Also, on such date,  the building in which the leasehold  premises are contained
was sold to 2150 Cabot, LLC, a related party.

[4] Share Exchange Agreement

Pursuant to a Share Exchange  Agreement,  as amended,  initially dated as of the
10th day of April, 2004 (the "YBR Agreement"),  by and among the Company, Yellow
Brick Road Ventures LLC, a New Jersey limited  liability  company ( "YBR"),  and
Music  Asset  Corp.,  a  Delaware  corporation  ("MAC")  that was at the time of
execution of the Agreement a wholly owned  subsidiary of YBR, the Company agreed
to acquire from YBR,  100% of the  outstanding  stock of MAC in exchange for the
issuance by the Company of  22,473,214.29  shares of the Company's common stock,
subject to YBR providing certain financing to the Company in connection with the
exploitation  of the assets of MAC, which,  subsequent to the transaction  would
have become a wholly owned subsidiary of the Company.

The assets of MAC included the non-exclusive  rights to distribute and exploit a
music library of approximately  9,000 recordings  pursuant to that certain Asset
Purchase  Agreement (the "Startek  Agreement") made the 7th day of April 2004 by
and between Startek  Entertainment Corp., a New Jersey Corporation  ("Startek"),
Joe Venneri who is also  President of Startek  ("Venneri")  and MAC. The Startek
Agreement  provides  that a sale of all of the shares of stock of MAC to a third
party  shall  not  affect  the  enforceability  of  this  agreement  subject  to
satisfying certain obligations, which the Company met, including the issuance of
1,000,000  shares of common  stock of the Company to  Startek.  The value of the
common  shares  granted  ($30,000) was charged to operations in the current year
and is included in current  liabilities  as these shares have not been issued as
of April 30, 2004.


                                F-10
<PAGE>


EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #6


[4] Share Exchange Agreement  - [Continued]

The Startek  Agreement  provided  that the  acquisition  price was Four  Million
Dollars  ($4,000,000)  (the  "Purchase  Price"),  payable  One  Million  Dollars
($1,000,000)  on the date of the  closing,  and the  balance  of  Three  Million
Dollars  ($3,000,000)  in the form of a Senior  Secured  Obligation  payable  as
twenty five percent (25%) of Distributable  Net Income as specifically  defined.
As a condition to the sale,  Mr.  Venneri  agreed to work for MAC and receive an
employment agreement, in connection therewith.  The Company was also required to
make a non-refundable  deposit of $25,000 to Startek, which was funded by a loan
from an unrelated third party. In addition, an officer of the Company loaned the
Company $5,000 in connection with  additional fees related to this  transaction.
These loans are payable on demand and are non-interest bearing.

As of the date hereof, YBR has not satisfied its obligation to deliver financing
to the Company,  and the Company has put YBR on notice that YBR is in default of
the YBR Agreement  and the Company  shall take all necessary  steps to terminate
the  transaction as provided by the YBR  Agreement.  At such time as the Company
terminates  this  transaction,  the Company will issue an aggregate of 5,750,000
shares of common stock, 4,250,000 to YBR and 1,500,000 Advisor Shares as part of
the YBR  Agreement.  The value of the common shares to be issued  ($172,500) was
charged to operations in the current year and is included in current liabilities
as these shares have not been issued as of April 30, 2004. YBR has  acknowledged
its  obligations  and agreed to cooperate in those  actions.  The non refundable
deposit in the amount of $25,000 has been charged to  operations  in the current
year ended April 30, 2004. .

[5] License Agreement

Under the terms of an amended  licensing  agreement  entered into on January 22,
1999,  pertaining  to the  manufacture  and marketing of a medical  device,  the
self-shielding  needle, the Company agreed to pay the licensor a maximum royalty
of $450,000  which was to be paid at a rate of $2,500 per month.  The  aggregate
royalty was charged to  operations  in the year ended April 30, 1999. On January
22, 2001, this license agreement 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.
Additionally,  the Company  could not pay the licensor  the required  additional
$250,000 to extend the regulatory  approval  requirement.  As of April 30, 2004,
the  Company  has not been  able to make the  royalty  payment  due to cash flow
deficiencies.  At April 30, 2004,  the remaining  unpaid  balance of $379,000 is
included in current liabilities.

[6] Note Payable

In  conjunction  with the  litigation  settlement  as described in Note 8A , the
Company  recorded a long- term note  payable in the amount of $75,000  which was
due on June 26, 2003 and bears  interest  at 7% per year.  The note was not paid
when due.  The  balance  due on the note with  accrued  interest  of  $89,928 is
included in current liabilities. No default has been declared on the note.


                                      F-11
<PAGE>

EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #7


[7] Stockholders' Deficit

[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] Issuance of Securities - On June 17, 1998,  the Company issued  options,  to
three  (3)  directors  and an  employee,  to  purchase  1,650,000  shares of the
Company's  common  stock at an exercise  price equal to the market  price on the
date of the  grant  ($.0938)  under the  Incentive  Stock  Option  Plan (See [C]
below).  In addition,  an aggregate of 500,000  options which were granted to an
officer under the terms of a prior employment  agreement were amended to have an
exercise price of ($.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  were to  mature  in five (5)  years on July 1,  2003,  with
interest  at 8%, and were  secured by the related  securities.  On July 1, 2003,
these promissory notes were extended for an additional three (3) year term under
the same terms as the  original  notes.  The Company has set up a reserve in the
aggregate of approximately  $296,000 for the principal and interest due on these
notes as their collectibility is uncertain at this time.

In April  2004,  the Company was  required to issue  1,000,000  shares of common
stock in connection  with a Share  Exchange  Agreement.  The value of the common
stock  granted  ($30,000)  was charged to  operations in the current year and is
included in current liabilities as these shares have not been issued as of April
30, 2004. In connection with this same agreement,  the Company will be required,
upon  termination of this agreement,  to issue 5,750,000 shares of common stock.
The value of the common stock to be issued  ($172,500) was charged to operations
in the current year and is included in current  liabilities as these shares have
not been issued as of April 30, 2004 (see Note 4).

[C] 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.  As of April 30,  2004 and April 30,
2003, there are no outstanding options under this plan.

[D] Net Loss Per Share - Net loss per share was computed by dividing net loss by
the weighted number of shares outstanding. The weighted average number of common
shares  outstanding  gives effect to the 1,000,000  shares of common stock to be
issued as of April 30, 2004 in connection  with a Share  Exchange  Agreement but
does not give effect to the 5,750,000  shares to be issued upon  termination  of
the Share Exchange  Agreement (see Note 4). Common stock  equivalents  have been
excluded as their effect would be anti-dilutive.

[E] Reserved Shares - Common shares reserved at April 30, 2004 are as follows:
<TABLE>
<S>                                             <C>
Incentive Stock Option Plan                       350,000
Non-Qualified Stock Option Plan                 2,000,000
                                                ---------
Total                                           2,350,000
-----                                           =========
</TABLE>

                                F-12

<PAGE>


EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #8


[8] Commitments and Contingencies

[A]  Litigation  - The Company had 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  asserted 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 was 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 sought 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.

In June 2001,  definitive  settlement  documents  were  executed The  settlement
documents  provided  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  final  court  review of the  settlement.  In December  2002,  the court
approved  the  settlement.  The note was not paid when due.  No default has been
declared on the note.

[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.  On June 26,  2001,  the
officer  exercised  this right and  purchased  25,000 shares of HDS common stock
from the Company at a price of $1.00 per share.  In  January,  2001,  2002,  and
2003,  this  agreement was extended for  successive one (1) year terms under the
same terms and conditions of the original agreement.




                                      F-13
<PAGE>


EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #9


[8]Commitments and Contingencies [Continued]

[C]  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 provided for monthly minimum lease payments of $9,625.
The lease  contained a five-year  renewal  option and provided  that the Company
shall pay for insurance, taxes and maintenance. In addition, the lease contained
an escalation  clause based upon increases in the consumer price index for years
four through  seven.  Effective  February 14, 1997,  the Company  entered into a
seven year sub-lease with HDS which provided for minimum monthly rental payments
of $9,625 to be received,  and was to expire in 2004.  On January 25, 2002,  the
Company entered into an Assignment and Amended and Restated Lease Agreement with
HDS, the existing sub-tenant of the premises leased by the Company at 2150 Cabot
Blvd. West, Langhorne,  PA. By such agreement, HDS accepted an assignment of the
Lease from the Company.  Also, on such date, the building in which the leasehold
premises are contained was purchased by 2150 Cabot,  LLC, a related party of the
Company.  Subsequent to the lease  assignment,  the Landlord of the premises and
the Company conducted discussions  respecting an outright release of the Company
from contingent or other  obligations of the Company to the Landlord  including,
but not  limited  to, the  obligation  of the Tenant to  restore  the  leasehold
premises to its original  condition upon  expiration of the Lease.  The Landlord
granted a general  release to the Company from any and all  contingent  or other
obligations  under the Lease in exchange for a release of any claim for a return
of its security deposit in the amount of $79,625. This forfeiture of the deposit
was charged to operations in year ended April 30, 2002.  Management  determined,
based on  estimates,  that the actual cost that would be incurred to restore the
premises  to its  condition  as existed  prior to the Lease  between  the former
Landlord and the Company would exceed the amount of the deposit.

On September 1, 2001,  the Company  entered into a sublease  with HDS for office
space on a month to month basis,  which  provides for a monthly lease payment of
$2,000. In November, 2003, the monthly rent was reduced to $300 per month.

Aggregate  rent  expense  was  $13,800 and $15,170 for the years ended April 30,
2004 and 2003, respectively.

[D] 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-14
<PAGE>


EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #10


[9] 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, 2004 are as follows:

<TABLE>
<S>                                                                   <C>
Deferred Tax Assets:
  Net Operating Loss Carryforward                                     $2,978,000
   Tax Basis of Intangible Assets in Excess of Book Basis                 78,000
                                                                      ----------
  Total                                                               $3,056,000
                                                                      ==========
Deferred Tax Asset                                                     3,056,000
Valuation Allowance                                                   (3,056,000)
                                                                      ----------
  Net Deferred Tax Asset                                              $     --
  ----------------------                                              ==========
</TABLE>

The valuation  allowance of  $3,056,000  represents an increase of $107,000 over
the preceding year. Net operating loss carryforwards of approximately $7,446,000
expire between 2011 and 2022.


A reconciliation between the statutory federal income tax rate and the effective
rate of income tax expense for the years ended April 30, 2004 and 2003 follows:
<TABLE>
                                                      2 0 0 4            2 0 0 3
                                                      -------            -------
<S>                                                   <C>                <C>
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                              --                 --
-------------------------                             =======            =======
</TABLE>


[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:
<TABLE>
                                                            Years ended
                                                            -----------
                                                              April 30,
                                                              ---------
                                                      2 0 0 4            2 0 0 3
                                                      -------            -------
<S>                                                   <C>                <C>

Interest - Net of Capitalized Interest                $1,872             $1,976
                                                      ------             ------
Income Taxes                                          $ --               $ --
                                                      ======             ======
                                F-15
</TABLE>
<PAGE>


EMBRYO DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #11



[12]Subsequent Event - HDS Share Exchange Agreement


Effective May 25, 2004,  Nesco  Industries,  Inc.  ("Nesco"),  a publicly traded
company listed on the Over The Counter  Bulletin Board Exchange (OTCC BB, Symbol
NESK),  HDS,  certain  stockholders  of Nesco and  certain  stockholders  of HDS
completed the transactions  contemplated by the Share Exchange Agreement,  dated
as of April 29,  2004  (the  "Exchange  Agreement"),  whereby  HDS has  become a
majority  owned  subsidiary of Nesco and, upon the completion of the exchange of
HDS securities for shares of Nesco common stock, the holders of HDS common stock
and debt will hold a majority interest of Nesco.

In  addition to the  exchange  of HDS common  stock and debt for shares of Nesco
common  stock  ("Nesco  Common  Stock"),  Nesco  agreed to dispose of all of its
subsidiaries,  convert  all of its  currently  outstanding  preferred  stock and
warrants into common stock and exchange certain of its indebtedness  into common
stock.

Nesco had  intended  to issue  shares of its common  stock in  exchange  for the
equity  securities  of HDS in certain  ratios as  provided  for in the  Exchange
Agreement. However, because Nesco did not have the required number of authorized
shares of common  stock to complete  the  exchange  on this basis,  it agreed to
issue  shares of its  newly  designated  Series B  Preferred  Stock  ("Preferred
Stock") for,  among others,  equity and debt of HDS as described in the Exchange
Agreement.  Upon filing of the  Certificate  of Amendment to the  Certificate of
Incorporation  to increase  the number of shares of common  stock which Nesco is
authorized  to issue,  each share of the Preferred  Stock will be  automatically
converted into shares of Nesco Common Stock.

The Company will hold the equivalent of approximately  4,837,500 shares or 5.42%
of Nesco  Common  Stock.  Nesco was  primarily  engaged  in  asbestos  abatement
contracting but had ceased operations in 2003.

                                      F-16