U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB


         (Mark One)

---      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 [Fee Required]

                            For the fiscal year ended

 X       TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
---      ACT OF 1934 [No Fee Required]

          For the transition period from May 1, 1996 to April 30, 1997
                                         -----------------------------

                         Commission file number 33-75276
                                                --------

                       Creative Medical Development, Inc.
                  --------------------------------------------
                 (Name of Small Business Issuer in its Charter)

          Delaware                                       68-0281098
 ------------------------------              -----------------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)  



  975 SE Sandy Blvd. Portland, Oregon                         97214
---------------------------------------                     ----------
(Address of Principal Executive Offices)                    (Zip Code)

(Issuer's Telephone Number (503) 230-8034
                            -------------

Securities registered under Section 12(b) of the Exchange Act:

       Title of each class            Name of each exchange on which registered

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

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

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

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

 Common Stock $.01 Par Value
--------------------------------------------------------------------------------
                                (Title of class)

  Warrants to purchase Common Stock $.01 Par Value
--------------------------------------------------------------------------------
                                (Title of class)


     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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
    -------        -------



<PAGE>



                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                   FORM 10-KSB
             ANNUAL REPORT FOR THE FISCAL YEAR ENDED April 30, 1997

PART I   Item 1.  Description of Business ...........................       1

         Item 2.  Description of Property ...........................       5

         Item 3.  Legal Proceedings .................................       5

         Item 4.  Submission of Matters to a Vote of Security Holders       6

PART II  Item 5.  Market for Common Equity
                  and Related Stockholder Matters.....................      6

         Item 6.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.................      7

         Item 7.  Financial Statements
                  Independent Auditor's Report........................    F-1
                  Consolidated Balance Sheets.........................    F-2
                  Consolidated Statements of Operations...............    F-3
                  Consolidated Statements of Stockholders'
                  Equity..............................................    F-4
                  Consolidated Statements of Cash Flows...............    F-5
                  Notes to Consolidated Financial Statements..........    F-7

         Item 8.  Changes In And Disagreements With Accountants On
                  Accounting And Financial Disclosure.................     11

PART III Item 9.  Directors, Executive Officers, Promoters
                  and Control Persons; Compliance with Section
                  16(a) in the Exchange Act..........................      11

         Item 10. Executive Compensation ............................      14

         Item 11. Security Ownership of Certain Beneficial Owners
                  and Management.....................................      14

         Item 12. Certain Relationships and Related Transactions ....      16

         Item 13. Exhibits and Reports on Form 8-K ..................      17

Index of Exhibits ...................................................      17

Signatures ..........................................................      20


<PAGE>

                                     PART I
                                     ------

Item 1.  Description of Business:
         -----------------------

         Introduction
         ------------

          Creative Medical Development, Inc. (the "Company") was incorporated in
          the state of  California  on July 20, 1992 and  reincorporated  in the
          state of Delaware on June 1, 1993.  The Company  designed,  developed,
          manufactured and marketed  ambulatory  infusion therapy products under
          the "EZ Flow" trade name.

          On September  13,  1995,  the Company  entered into an Asset  Purchase
          Agreement with Gish Biomedical,  Inc. ("Gish") for sale of the EZ Flow
          Pump technology and product line. Under its terms,  substantially  all
          of the Company's  manufacturing  related assets (with a net book value
          of $680,957)  were sold for $600,000 cash and $2,000,000 of Gish Stock
          (240,240 shares). Pursuant to the terms of the agreement, operation of
          the EZ Flow business was  transferred to Gish as of September 13, 1995
          and the sale closed April 17, 1996.

          On April 17, 1997,  the Company  entered into an agreement  for merger
          and  reorganization  with  OMNI  International  Rail  Products,  Inc.,
          ("OMNI") a privately held company in the business of manufacturing and
          distributing  premium  rail  crossing  surface  products in the United
          States and  internationally.  The agreement provided for the merger of
          OMNI with a wholly  owned  subsidiary  of the  Company  formed for the
          purposes  of the  transaction.  Subject  to certain  adjustments,  the
          Company was valued at $2,000,000 and OMNI was valued at $4,000,000.

          OMNI was an  Oregon  corporation  formed in 1994 to  acquire  the OMNI
          premium crossing business from Reidel Environmental Technologies, Inc.
          That  business  was operated by OMNI until the merger with the Company
          and  its  operations   continue  under  the  Company's   wholly  owned
          subsidiary corporation OMNI Products,  Inc. At the time of the merger,
          the OMNI  executive  officers  became the  executive  officers  of the
          Company  and the  subsidiary  and all  but one of the  OMNI  directors
          became the directors of the Company and the subsidiary.

          The   Company's   transaction   with  OMNI  closed   April  30,  1997.
          Subsequently,  the  Company  changed its fiscal year to April 30, 1997
          consistent  with  OMNI's  fiscal  year to  facilitate  accounting  and
          reporting financial results.

          Products
          --------

          OMNI designs,  engineers,  manufactures,  markets and installs premium
          rail crossing surface products for the U.S. and international markets.
          OMNI's  products  cover the full spectrum of premium  crossings  which
          

                                              


                                        1

<PAGE>



          includes crossings  manufactured from recycled rubber,  virgin rubber,
          reinforced concrete and a combination of rubber and concrete.

          OMNI's  products  are  approved  by all major North  American  Class 1
          railroads,  such as Burlington Northern-Santa Fe and Union Pacific and
          many foreign railroads.

          Rail Crossing Market
          --------------------

          Grade   crossings  are  an  important   part  of  the   transportation
          infrastructure  wherever  rail and  road  traffic  intersect.  Premium
          crossings  made from  recycled  rubber,  virgin  rubber or  reinforced
          concrete  provide a  smooth,  safe and quiet  means  for  vehicles  to
          quickly pass over  railroad  tracks.  The choice of rubber or concrete
          depends  on the  application  and is  primarily  a matter of  customer
          preference.  The longer  life of rubber or concrete  premium  crossing
          surfaces  significantly  reduce  maintenance  costs  compared  to  the
          traditional surfaces of timber or asphalt.

          Many major  U.S.  railroads  have  recently  moved  from solid  rubber
          crossings  to concrete  crossings  with rubber next to the rail.  This
          trend  has  accelerated  over the past  several  years as a result  of
          industry  consolidation.  It is now estimated that the installation of
          concrete  crossings  constitute  the majority of the premium  crossing
          surface market.

          The Company  estimates that the total premium  crossing surface market
          in the U.S.  is  approximately  $45  million  and is growing at a rate
          exceeding  20% per year with concrete  crossings  the fastest  growing
          segment.   The  Company  believes  its  revenues  currently  represent
          approximately  28%  of the  total  domestic  market  for  all  premium
          crossing  surfaces  and is nearly  twice the size of the next  largest
          competitor in North America.

          The vast majority of grade  crossings are  maintained or  retro-fitted
          with  asphalt,   timber  planks,  concrete  pavement  or  consolidated
          materials.  This market  segment is  estimated at over $400 million in
          the U.S. and Canada. Because of their benefits, this market segment is
          rapidly  converting to premium  crossings.  OMNI believes that, at the
          current rate of growth and acceptance by customers,  within five years
          approximately  20% of this  market  segment  will  convert  to premium
          crossings.

          Crossing safety is  increasingly  scrutinized at the federal level and
          legislative  action is likely to mandate certain safety  standards for
          crossings.  Such  legislation  may  increase  the market  for  premium
          crossing surfaces.

          Where customers  formerly relied on government funding to pay for most
          premium crossing surfaces, there is a growing recognition that premium
          crossing  surfaces   significantly  reduce  installation  and  ongoing
          maintenance costs over the life of the crossing.  They have discovered
          significant  long term cost  savings by  installing  premium  crossing
          surfaces  using their own operating  funds.  Major  railroads  such as
          

                                        2

<PAGE>


          Burlington  Northern/Santa  Fe  and  Union  Pacific  are  expected  to
          significantly  increase their premium  crossing  installations  in the
          next year.

          The  international  market for premium  crossings  is  estimated to be
          approximately  $20-$25  million  per year.  OMNI's  full depth  rubber
          products  are  approved  by rail  systems  in over 20  countries.  The
          Company's share of this market has been between 5-6%.

          The  international  market  is not  growing  as fast  as the  domestic
          market, but it is expected to double within five years.  Currently the
          majority of international  premium crossing  surfaces outside the U.S.
          are rubber,  but concrete is expected to take an  increasing  share as
          foreign railroads follow the U.S. lead.

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

          U.S. sales and marketing is implemented  through a system of six sales
          regions  designed to provide  comprehensive  coverage of key  railroad
          customers.  Three regions are managed by sales  manager  employees and
          three are managed by independent sales  representatives.  In addition,
          OMNI has an independent account representative working solely in Omaha
          to service Union  Pacific,  one of the largest users of grade crossing
          materials. All report to the Vice President of Sales and Marketing.

          OMNI sales employees are compensated on a base salary plus commission.
          Independent   sales   representatives   are   compensated   solely  on
          commission.  Commissions  are not paid  until OMNI  collects  from the
          customer.

          Another  component of the Company's sales and marketing  effort is its
          unique  customer  oriented  program of 20  part-time  field  technical
          representatives  who serve as an extension of the regional sales force
          for technical needs such as installations  and problem solving.  These
          individuals  have  strong   backgrounds  in  track   construction  and
          maintenance and are primarily retired railroad employees.  Their prior
          relationships,  loyalty to OMNI and customer service has significantly
          enhanced OMNI's sales efforts.

          OMNI  markets  its  products  internationally  using a  network  of 20
          foreign  distributors.  Exclusive  distribution  agreements  have been
          executed  with each of these  organizations  in individual or multiple
          countries.  The  Company  sells  product to each  distributor  from an
          established  price list and the distributor sells the product at their
          price to the customer.  These sales are generally bank guaranteed with
          a letter of credit.

          Although the Company has  approximately  300 customers,  approximately
          15% of its sales for the fiscal  year ended April 30, 1996 were to CSX
          Transportation.  Approximately  17% and 11% of  OMNI's  sales  for the
          fiscal year ended April 30, 1997 were to Burlington  Northern-Santa Fe
          and CSX  Transportation,  respectively.  Sales to the  Company's  five
          largest customers as a group for the fiscal years ended April 30, 1996
          and 1997 were 42% and 43% respectively.

                                        3

<PAGE>


          Material Supplies
          -----------------

          Basic raw materials  required for manufacturing the Company's products
          include tire buffings obtained from retreaders, off-spec virgin rubber
          from rubber brokers,  polyurethane binder,  concrete,  steel rebar and
          steel angle.

          Concrete  and steel  materials  are  available  from many  sources  in
          multiple  locations.  However,  availability of off-spec virgin rubber
          and tire  buffings  is subject to market  variations.  The Company has
          contracts  for the  supply  of tire  buffings  that  it  believes  are
          adequate for its needs.  Because of  fluctuation in the demand for its
          products,  the Company  believes  that there is an adequate  supply of
          off-spec virgin rubber to meet its needs.

          The Company  anticipates  increasing  manufacturing  capacity  for its
          concrete  products.  Since there are a number of sources available for
          the  Company's   production   equipment,   no  problems  in  obtaining
          production  equipment at competitive prices and in a timely manner are
          anticipated.

          Patents and Licenses
          --------------------

          OMNI  has  been  issued  or has  patents  pending  on  several  of its
          products,  such as its Improved-Concrete and Standard  Concrete-Rubber
          products  incorporating  rubber  next  to  the  rail  with  reinforced
          concrete  panels.  There can be no assurance  that any patents  issued
          would afford protection against competition from similar inventions or
          products, or would not be infringed upon or designed around by others.
          However,  the  Company  intends  to  enforce  all  patents it has been
          issued.

          Pursuant to a royalty  agreement with Red Hawk Rubber Co. ("Red Hawk")
          which was transferred to OMNI in the acquisition from Reidel described
          above,  OMNI is obligated to pay a royalty equal to 5% of net sales of
          certain  products  acquired from Red Hawk.  The  agreement  expires in
          June, 1999.

          Research and Development
          ------------------------

          OMNI is engaged in a continuing program of research and development to
          improve  existing   products  and  develop  more  cost  effective  and
          efficient  rail  crossing  products.  The  Company's  expenditures  on
          research and development for the fiscal years ended April 30, 1997 and
          1996 were $61,646 and $70,852 respectively.

          Employees
          ---------

          As of April 30, 1997,  OMNI had 97 full time employees and 2 part time
          employees.  Approximately  79  full  time  employees  and 2 part  time
          employees  were  engaged  in   manufacturing   and  the  remainder  in
          marketing,   sales,  research  and  development,   administrative  and
          executive positions.

                                        4

<PAGE>




Item 2  Description of Property
        -----------------------

     The Company owns or leases the following properties:

                          Approximate       Own or
        Location         Square Footage     Lease             Purpose
     --------------      --------------    -------        -----------------
     Portland, OR    (1)      3,000         Lease         Executive Offices
     Portland, OR    (2)     15,800         Lease         Manufacturing
     McHenry, IL     (3)     21,271         Own           Manufacturing
     Lancaster, PA   (3)     19,348         Own           Manufacturing
     Ennis, TX       (3)     15,300         Own           Manufacturing
     Buena Park, CA  (4)        635         Lease         Sales Office
     Nevada City, CA (5)     30,000         Own           Held for Resale

(1)  Leased on month-to-month basis.

(2)  Leased through April,  2002 with an option to renew for an additional  five
     years.

(3)  Properties  are subject to a blanket  mortgage loan of $912,264  payable in
     monthly installments of $13,631,  including interest at 10% payable in full
     in December  31, 1998.  Properties  are also  pledged as  collateral  for a
     revolving line of credit and term and capital expenditure loans.

(4)  Leased through May, 2000.

(5)  Property  is subject to a mortgage  loan of  $1,230,000  payable in monthly
     installments  of $12,750  including  interest at 11.375% payable in full in
     December,  1998.  One hundred  percent of the property is leased to others.
     One percent of the property is owned by Ron Gangemi,  a shareholder  of the
     Company.  Property is also pledged as  collateral  for a revolving  line of
     credit and term and capital expenditure loans.

Item 3  Legal Proceedings
        -----------------

          Approximately  August 7, 1995,  OMNI  signed a letter  agreement  with
          Transcontinental Capital Partners ("TCP") to provide various financial
          services.  Pursuant to the agreement,  certain  services were provided
          and paid for. In addition,  TCP identified a potential equity investor
          with whom OMNI signed a non-binding statement of intent for a proposed
          transaction.  On or about June 7, 1996, OMNI  terminated  negotiations
          with the potential equity investor and the agreement with TCP.

                                        5

<PAGE>

          In September,  1996,  TCP filed an action against OMNI in the Superior
          Court of California for Santa Clara County alleging that OMNI breached
          the financial  services  agreement and is obligated to pay  additional
          fees to TCP for services  purportedly  rendered to OMNI.  In response,
          OMNI  removed  the case to the United  States  District  Court for the
          Northern District of California  (Transcontinental Capital Partners v.
          OMNI  Products,  Inc.,  Case No. C-96 21040 WAI (PVT)),  answered  the
          Complaint and filed a Cross-Complaint  for damages for TCP's breach of
          the financial services agreement and other common law claims. The case
          has been referred to the District  Court's  Early  Neutral  Evaluation
          program and discovery has commenced. The Company believes that the TCP
          claim is unfounded and intends to contest the case vigorously.

Item 4  Submission of Matters to a Vote of Security Holders
        ---------------------------------------------------

          No matters  were  submitted to a vote of security  holders  during the
          fourth quarter of the fiscal year covered by this report.

                                     PART II

Item 5  Market for Common Equity and Related Stockholder Matters
        --------------------------------------------------------

          The Company's  Common stock  commenced  trading on the NASDAQ Smallcap
          Market on May 13,  1994.  Since  May,  1995,  it has traded on the OTC
          Bulletin Board.

--------------------------------------------------------------------------------
                     Quarterly Common Stock Bid Price Ranges
--------------------------------------------------------------------------------
                              1996                              1997
--------------------------------------------------------------------------------
   Quarter            High             Low              High              Low
--------------------------------------------------------------------------------
     1st              .375             .375              .31              .25
--------------------------------------------------------------------------------
     2nd              .375             .375              .31              .25
--------------------------------------------------------------------------------
     3rd              .375             .25               .31              .25
--------------------------------------------------------------------------------
     4th              .375             .25               .50              .25
-------------------------------------------------------------------------------

          At July 31,  1997,  the  Company  had  approximately  350  record  and
          beneficial stockholders.

          No dividends  have been  declared or paid on the Common Stock and none
          are anticipated.


                                        6

<PAGE>



Item 6  Management's Discussion and Analysis of Financial Condition and Results
        of Operations
--------------------------------------------------------------------------------

          The following  Selected  Financial  Data for the years ended April 30,
          1997 and 1996 have been derived from the  financial  statements of the
          Company  as  audited   by  KPMG  Peat   Marwick   LLP,  the  Company's
          independent public accountants. This Selected Financial Data should be
          read  in  conjunction  with,  and  is  qualified  in its  entirety  by
          reference  to, the  financial  statements  and related  notes  thereto
          included elsewhere in this Report.

          Except for the historical  information  contained herein,  the matters
          set forth in this Report include forward-looking statements within the
          meaning of the "safe  harbor"  provisions  of the  Private  Securities
          Litigation  Reform Act of 1995. These  forward-looking  statements are
          subject to risks and  uncertainties  that may cause actual  results to
          differ   materially.   These  risks  and  uncertainties  are  detailed
          throughout  this  Report  and are  discussed  from time to time in the
          Company's  periodic  reports  filed with the  Securities  and Exchange
          Commission.  The  forward-looking  statements  included in this Report
          speak only as of the date hereof.

          As mentioned in item 1 (The Business) the Company,  on April 30, 1997,
          completed an agreement and plan of merger with OMNI International Rail
          Products,   Inc.  (OMNI).  For  financial  reporting   purposes,   the
          transaction is considered a reverse acquisition and has been accounted
          for under the  purchase  method of  accounting.  Thus,  the  operating
          results  presented and discussed  herein  reflect only the activity of
          OMNI.

                                               As of and for the Periods Ended
                                                          April 30,
                                            ------------------------------------
                                            (In thousands except per share data)
                                                          1997          1996
                                                        --------       --------

Revenue..............................................   $ 12,902       $ 13,565

Gross Profit.........................................      2,345          3,967

(Loss) earnings from operations......................       (297)           935

Net (loss) earnings..................................     (1,295)           118

Net (loss) earnings per share........................      ( .41)           .04



                                        7

<PAGE>

REVENUE

The Company derives its revenues from the sale of  premium-grade  rail crossings
to railroads,  general  contractors and  municipalities.  Revenues for 1997 were
$12,902,491 as compared to $13,565,411 in 1996,  representing a decline of 4.9%.
This  decline  is due  primarily  to a shift  in  customer  preference  from the
Company's rubber crossings to its recently introduced  concrete products.  Sales
of rubber  crossings  declined  from  $9,477,590  in 1996 to $7,781,159 in 1997.
Sales of concrete  products  increased from  $4,087,821 in 1996 to $5,121,332 in
1997. The Company anticipates that this trend will continue and expects concrete
to continue to grow and become its dominant product in 1998 and beyond.

COST OF GOODS SOLD AND EXPENSES

The  following  table sets forth the direct costs of revenue as a percentage  of
revenue and general and administrative expenses,  marketing and selling expenses
as a percentage of revenue for the years ended April 30:

                                                          1997        1996
                                                          ----        ----

Cost of goods sold......................................   82          71

General and administrative expenses.....................   10          11

Marketing and selling expenses..........................   10          11

COST OF GOODS SOLD

Cost of goods  sold for the year  ended  April  30,  1997  were  $10,557,688  as
compared  to  $9,598,110  in 1996.  The  increase in both  absolute  dollars and
percent of sales is due mainly to  extraordinary  costs  incurred  for  warranty
expense and the write off of obsolete inventory.


                    WARRANTY EXPENSE AND INVENTORY WRITE OFF

                               FYE April 30, 1997           FYE April 30, 1996

                               Dollars        Percent of    Dollars  Percent of
                                              Sales                  Sales

Warranty Expense               $483,528       3.7%          $101,946    0.8%

Inventory Written Off          $571,200       4.4%          $ 80,700    0.6%



                                       8

<PAGE>




Approximately $150,000 of the extraordinary warranty expense related to a single
order  shipped  more  than  two  years  ago.  The  special  order  met  customer
specifications,  but was replaced in order to maintain the  relationship  with a
significant  customer.  Since that order,  the Company has not  manufactured and
will not manufacture that particular  product.  The balance of the extraordinary
warranty  expense related to introduction of a new  manufacturing  process.  The
Company  believes that the  manufacturing  process issues have been resolved and
will not recur.

The Company's  policy is to write off inventory that is more than two years old.
The majority of the  extraordinary  inventory  write off in the year ended April
30, 1997 occurred in March and April and includes a $150,000  reserve related to
overstocked inventory.  Management believes that further extraordinary write off
of inventory will not be required.

GENERAL AND ADMINISTRATIVE EXPENSES

General and Administrative  Expense were $1,257,227 and $1,461,650 for the years
ended April 30, 1997 and 1996, respectively.  The decrease is due to a reduction
in the cost of legal services and insurance.

SELLING EXPENSE

Selling  Expenses for the year ended April 30, 1997 were  $1,323,070 as compared
to  $1,499,061 in 1996.  The decrease was due to a lowering of sales  commission
percentages paid to its sales force.

INTEREST EXPENSE

Interest  Expense was  $687,095  and $713,825 for the years ended April 30, 1997
and 1996  respectively.  The decline is due to lower  levels of term debt as the
Company makes monthly principal payments.

LEGAL SETTLEMENT

On July 24, 1997, the Company entered into a settlement  agreement  arising from
disputed royalty  payments.  The terms of the settlement  agreement  require the
Company to pay $50,000  within sixty days of the agreement  date and $20,000 per
quarter for five years thereafter. Among other benefits, the settlement relieves
the  Company of  contractual  liability  for royalty  payments  which would have
accrued through December, 1999. Management has calculated the discounted present
value of the  settlement  at $334,500 and has reserved  this amount at April 30,
1997. This one-time charge accounts for approximately  twenty-six percent of the
net loss for the year ending April 30, 1997.

                                        9

<PAGE>

NET LOSS

The Company  lost  $1,295,065  in the year ending  April 30, 1997  compared to a
profit of $117,655 in the year ending April 30,  1996.  The loss was caused by a
significant  increase in Cost of Goods Sold occasioned by the increased warranty
expense and inventory  write off described  above and the legal  settlement also
described above.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  cash and  investment  balances  at April 30,  1997  amounted  to
$894,758.  Cash generated from operations in 1997 was $331,424. The Company also
received $100,000 of net proceeds from the sale of stock.

Net working capital at April 30, 1997 amounted to  ($1,694,116)  because current
debt maturities and other short-term  commitments  exceeded the Company's liquid
assets  available to pay such  obligations.  This  situation  resulted  from the
Company's  principal  lender's  acceleration of term debt  obligations  totaling
$1,768,142 to August 31, 1997 which required the obligations to be classified as
current  liabilities.   The  reclassification  also  resulted  in  the  auditors
including  a "going  concern"  qualification  in their  opinion.  The Company is
negotiating with new lenders to establish  appropriate long term debt financing.
Although  management  anticipates  favorable  conclusion of those  negotiations,
there can be no assurance  that such  financing will be available on a favorable
basis,  or at all.  In the event  the  Company  is  unable to obtain  additional
financing its operations may be significantly reduced.

Management  believes that it will also need to raise  additional  equity capital
during the next  fiscal  year in order to fund its  working  capital and capital
expenditure  needs.  Depending  upon the Company's  results of  operations,  its
future capital needs and available marketing opportunities,  the Company may use
various  financing  sources to raise equity capital.  Such sources could include
mergers or private equity placements.  There can be no assurance that such funds
will be available on a favorable basis, if at all.

The Company's  capital  expenditures were $375,316 in 1997 and $680,492 in 1996.
Expenditures in 1997 were incurred  primarily for equipment to expand production
capacity.  Capital  expenditures  for 1998 are estimated at  $1,263,000  and are
expected to be funded with a mix of additional equity and term debt.



                                       10

<PAGE>



                       CREATIVE MEDICAL DEVELOPMENT, INC.

                                 AND SUBSIDIARY

                        Consolidated Financial Statements

                                 April 30, 1997


                   (With Independent Auditors' Report Thereon)


<PAGE>

KPMG Peat Marwick LLP
     
     Suite 2000
     1211 South West Fifth Avenue
     Portland, OR 97204



                          Independent Auditors' Report




The Board of Directors
Creative Medical Development, Inc.:


We have audited the accompanying  consolidated balance sheet of Creative Medical
Development,  Inc.  and  subsidiary  as of  April  30,  1997,  and  the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years ended  April 30, 1997 and 1996.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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 consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Creative Medical
Development,  Inc. and subsidiary as of April 30, 1997, and the results of their
operations  and their cash flows for the years  ended April 30, 1997 and 1996 in
conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in note 11 to
the   consolidated   financial   statements,   the  Company  suffers   liquidity
constraints, due to the unexpected acceleration of certain debt maturities, that
raise  substantial  doubt  about its  ability to  continue  as a going  concern.
Management's plans in regard to these matters are also disclosed in note 11. The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.



                                             KPMG PEAT MARWICK LLP


Portland, Oregon
June 27, 1997, except as to
     note 12(c) to the consolidated
     financial statements as to
     which the date is July 24, 1997


                                      F-1
<PAGE>


                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                           Consolidated Balance Sheet

                                 April 30, 1997


                                     Assets
                                     ------

Current assets:
     Cash                                                          $    139,635
     Investment securities                                              755,123
     Accounts receivable, less allowance for doubtful
        accounts of $37,863                                           1,818,109
     Inventories, net                                                 2,494,743
     Prepaid expenses and deposits                                       20,680
                                                                   ------------

                  Total current assets                                5,228,290

Real estate held for sale                                             1,500,000
Property, plant and equipment, net                                    4,286,656
Organization costs, net of $328,040 accumulated amortization            237,955
                                                                   ------------

                                                                   $ 11,252,901
                                                                   ------------

                      Liabilities and Stockholders' Equity
                      ------------------------------------

Current liabilities:
     Accounts payable                                                 1,364,079
     Accrued liabilities                                              1,150,604
     Notes payable                                                    4,376,723
     Current portion of long-term debt                                   31,000
                                                                   ------------

                  Total current liabilities                           6,922,406
                                                                   ------------
Long-term debt, less current portion                                  2,845,276
Non-current accrued liabilities                                         265,950

Commitments and contingencies

Stockholders' equity:
     Convertible preferred stock, $.01 par value,
        5,000,000 shares authorized:
        Series B, 1,000,000 shares authorized,
        622,066 shares issued and outstanding                             6,221
     Common stock, 10,000,000 shares authorized, $.01 par
        value, 5,554,337 shares issued and outstanding                   55,543
     Additional paid-in capital                                       2,444,606
     Retained deficit                                                (1,287,101)
                                                                   ------------

                  Total stockholders' equity                          1,219,269
                                                                   ------------

                                                                   $ 11,252,901
                                                                   ============


See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>
<TABLE>
<CAPTION>

                                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                                 AND SUBSIDIARY

                                      Consolidated Statements of Operations

                                       Years ended April 30, 1997 and 1996


                                                                       1997                      1996
                                                                  ------------              ------------

<S>                                                               <C>                         <C>       
Net sales                                                         $ 12,902,491                13,565,411
Cost of sales                                                       10,557,688                 9,598,110
                                                                  ------------              ------------

                  Gross profit                                       2,344,803                 3,967,301
                                                                  ------------              ------------

Selling expenses                                                     1,323,070                 1,499,061
Administrative expenses                                              1,257,227                 1,461,650
Research and development                                                61,646                    70,852
                                                                  ------------              ------------

                                                                     2,641,943                 3,031,563

                  (Loss) earnings from operations                     (297,140)                  935,738
                                                                  ------------              ------------

Other income (expense):
     Interest expense                                                 (687,095)                 (713,825)
     Legal settlement                                                 (334,500)                     --
     Miscellaneous expense                                              (6,781)                  (40,051)
     Loss on sale of assets                                            (25,156)                  (27,690)
                                                                  ------------              ------------

                  Total other expense                               (1,053,532)                 (781,566)
                                                                  ------------              ------------

                  (Loss) earnings before income taxes               (1,350,672)                  154,172

(Benefit) provision for income taxes                                   (55,607)                   36,517
                                                                  ------------              ------------

                  Net (loss) earnings                             $ (1,295,065)                  117,655
                                                                  ============              ============

Net (loss) earnings per share                                     $       (.41)                      .04
                                                                  ============              ============

Weighted average common shares outstanding                           3,126,294                 2,808,516
                                                                  ============              ============


See accompanying notes to consolidated financial statements.
</TABLE>


 
                                               F-3



<PAGE>
<TABLE>
<CAPTION>
                                                CREATIVE MEDICAL DEVELOPMENT, INC.
                                                         AND SUBSIDIARY

                                          Consolidated Statements of Stockholders' Equity
                                                Years ended April 30, 1997 and 1996





                                    Preferred stock                                        
                                      Series B                        Common stock          Additional    Retained       Total
                            --------------------------       --------------------------       paid-in     earnings     stockholders'
                              Shares            Amount           Shares          Amount       capital     (deficit)        equity
                              ------            ------           ------          ------       -------     ---------    -------------

<S>                         <C>                 <C>             <C>            <C>           <C>            <C>           <C>    
Balance, April 30, 1995              -          $    -          2,688,926      $ 26,889      933,111        20,409        980,409

Issuance of common stock             -               -            412,095         4,121      395,879            -         400,000
Dividends                            -               -                 -             -            -        (65,100)       (65,100)
Net earnings                         -               -                 -             -            -        117,655        117,655
                             ----------         -------      ------------      --------  -----------  ------------   ------------

Balance, April 30, 1996              -               -          3,101,021        31,010    1,328,990        72,964      1,432,964

Issuance of common stock             -               -            111,743         1,117      116,383            -         117,500
Dividends                            -               -                 -             -            -        (65,000)       (65,000)
Payment of stock dividend            -               -            233,428         2,334      186,478            -         188,812
Preferred and common
     shares issued in
     merger                     622,066           6,221         2,108,145        21,082      812,755            -         840,058
Net loss                             -               -                 -             -            -     (1,295,065)    (1,295,065)
                             ----------         -------      ------------      --------  -----------     ---------      ---------

Balance, April 30, 1997         622,066         $ 6,221         5,554,337      $ 55,543    2,444,606    (1,287,101)     1,219,269
                             ==========         =======      ============      ========  ===========     =========   ============


See accompanying notes to consolidated financial statements.


</TABLE>

                                                              F-4
<PAGE>
<TABLE>
<CAPTION>
                                              CREATIVE MEDICAL DEVELOPMENT, INC.
                                                       AND SUBSIDIARY

                                             Consolidated Statements of Cash Flows

                                              Years ended April 30, 1997 and 1996




                                                                                    1997            1996
                                                                                -----------    -----------

Cash flows from operating activities:
<S>                                                                             <C>                <C>    
     Net (loss) earnings                                                        $(1,295,065)       117,655
     Adjustments to reconcile net (loss) earnings to net cash
        provided by operating activities:
           Depreciation and amortization                                            491,642        444,785
           Legal settlement                                                         334,500           --
           Loss on sale of assets                                                    25,156         27,690
           Deferred income taxes                                                    (55,607)        36,517
           Change in assets and liabilities:
               Accounts receivable                                                 (199,814)       747,872
               Inventories                                                          296,361     (1,126,312)
               Prepaid expenses and deposits                                          1,876          3,734
               Accounts payable                                                     425,992       (108,902)
               Accrued liabilities                                                  306,383         68,897
                                                                                -----------    -----------

                      Net cash provided by operations                               331,424        211,936
                                                                                -----------    -----------

Cash flows from investing activities:
     Proceeds from sale of assets                                                    17,166          2,500
     Purchase of property, plant and equipment                                     (375,316)      (680,492)
     Organization costs                                                                --            3,293
                                                                                -----------    -----------

                      Net cash used by investing activities                        (358,150)      (674,699)
                                                                                -----------    -----------

Cash flows from financing activities:
     Net (payment) borrowings on notes payable                                     (116,326)       420,352
     Payments on long-term debt                                                     (14,281)      (481,882)
     Borrowing on long-term notes                                                      --          384,030
     Proceeds from sale of stock                                                    100,000        400,000
     Acquisition costs                                                             (185,065)          --
                                                                                -----------    -----------

                      Net cash (used) provided by financing activities             (215,672)       722,500
                                                                                -----------    -----------

                      (Decrease) increase in cash                                  (242,398)       259,737

Cash at beginning of year                                                           382,033        122,296
                                                                                -----------    -----------

Cash at end of year                                                             $   139,635        382,033
                                                                                ===========    ===========


                                                                                               (Continued)
                                                    F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                               CREATIVE MEDICAL DEVELOPMENT, INC.
                                                       AND SUBSIDIARY

                                      Consolidated Statements of Cash Flows, Continued




                                                                                    1997                 1996
                                                                                ----------             --------

Supplemental disclosure of cash flow information: Cash paid for:
<S>                                                                             <C>                     <C>    
        Interest                                                                $  677,847              726,321
        Income taxes                                                                  --                   --

Supplemental schedule of non-cash investing and financing activities:
        Stock dividend                                                              65,000               65,100
        Issuance of common stock on conversion of debt                              17,500                 --
        Effect of acquisition:
           Fair value of assets acquired                                         2,255,123                 --
           Liabilities assumed                                                   1,230,000                 --


See accompanying notes to consolidated financial statements.


</TABLE>
                                                           F-6
<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                                 April 30, 1997




(1) Summary of Significant Accounting Policies

     (a)  Description  of the  Company,  Basis of  Presentation  and  Change  in
          Reporting Entity
          ----------------------------------------------------------------------

          Creative Medical Development,  Inc. (CMD),  incorporated in California
          on July 20,  1992,  designed,  developed,  manufactured  and  marketed
          propriety  ambulatory  infusion  therapy  products for alternate  site
          patient care. On September 13, 1995, CMD sold substantially all of its
          operating  assets  and  technology  and  since  that  time has not had
          significant operating results.

          Effective  April 30, 1997, CMD and OMNI  International  Rail Products,
          Inc. (OMNI),  completed an agreement and plan of merger which provided
          for the merger of OMNI with and into a wholly-owned  subsidiary of CMD
          (collectively,  the Company).  Upon consummation of the merger, OMNI's
          name changed to OMNI  Products,  Inc. Just prior to the closing of the
          merger,  OMNI  completed  a  recapitalization  in which  the  Board of
          Directors authorized the conversion of:

               Series B  preferred  stock  into  Series A  preferred  stock (new
               Series A preferred stock);

               650,000  shares of new  Series A  preferred  stock  into  260,000
               shares of common stock;

               $188,812 in accrued dividends into 75,525 shares of common stock.

          Also, at the closing of the merger,  CMD completed a  recapitalization
          in which the Board of Directors  authorized  the conversion of 810,000
          shares of Series A  preferred  stock into  270,000  shares of Series B
          preferred stock.

          Under the terms of the merger  agreement,  the  shareholders and stock
          option  holders of OMNI exchanged all of their common stock and common
          stock options for common stock and Series B preferred stock and common
          and preferred  stock  options of the Company.  OMNI's common stock and
          common stock options were  converted  into CMD common stock and common
          stock  options  at  a  ratio  of  3.091  to  1.0.  In  addition,  OMNI
          shareholders  and stock  option  holders  received  352,066  shares of
          Series B  preferred  stock and 187,934  options to  purchase  Series B
          preferred stock, respectively.

                                                                     (Continued)



                                      F-7

<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




          Upon the completion of the  transaction,  former OMNI security holders
          owned approximately 67% of the total outstanding shares of the Company
          on a fully diluted basis.  The initial  ownership  ratio is subject to
          adjustment  one year after the closing of the  transaction.  The final
          ownership   ratio  will  reflect  any   adjustments   resulting   from
          differences  between the assumed value of CMD's net assets at the time
          of the  merger  and a final  determination  to be made as of April 30,
          1998. If the final ownership ratio differs from the initial  ownership
          ratio in favor of OMNI, OMNI's  shareholders  will receive  additional
          shares of CMD common  and Series B  preferred  stock as  necessary  to
          reflect  the  final   ownership   ratio  thus   increasing   the  OMNI
          shareholders' relative ownership. If the final ownership ratio differs
          from the initial  ownership ratio in favor of CMD, an amount up to 10%
          of the CMD common  stock and  Series B  preferred  stock  issued to an
          escrow  for OMNI's  shareholders  will be  canceled  as  necessary  to
          reflect  the final  ownership  ratio,  thus  decreasing  the  relative
          percentage  ownership  of  OMNI's  shareholders.  In no case will this
          adjustment result in OMNI's shareholders owning less than 64.3% of the
          total outstanding shares.

          The  transaction   between  CMD  and  OMNI  is  considered  a  reverse
          acquisition  for financial  reporting  purposes and has been accounted
          for  under  the  purchase  method  of  accounting.  As a  result,  for
          financial statement  purposes,  i) the historical values of OMNI's net
          assets have been retained; ii) the net assets of CMD immediately prior
          to the merger  have been  recorded  at their fair value on the date of
          the  transaction,  iii)  the  results  of the  operations  of CMD  are
          included in the results of the Company beginning on the effective date
          of the  transaction,  iv) the  dollar  balance  of OMNI's  accumulated
          deficit has been retained,  and the balance of OMNI's common stock and
          additional paid-in capital have been reallocated to be consistent with
          the  ratio  of CMD's  preferred  and  common  stock.  Assets  acquired
          consisted of investment  securities and a building,  while liabilities
          assumed  consisted  of  the  mortgage  associated  with  the  building
          acquired. The fair value of assets acquired exceeded the fair value of
          liabilities  assumed  by  approximately  $1,025,000;  such  excess was
          attributed to the shares issued in the merger. OMNI's costs associated
          with the  transaction,  totaling  approximately  $185,000,  were  also
          attributed to the shares issued in the merger.

          The consolidated  statements of operations and cash flows reflect only
          the activity of OMNI.

          Unaudited pro forma combined  results of operations of the Company for
          fiscal  years  1997 and  1996  are  presented  below.  Such pro  forma
          presentation has been prepared  assuming that the acquisition had been
          made as of the beginning of fiscal year 1996.

                                                     1997           1996
                                                     ----           ----

           Revenues                              $ 12,902,491     13,565,411
           Net (loss) earnings                       (338,012)       220,874


                                                                     (Continued)
                                      F-8

<PAGE>
                                      


                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




     (b) Principles of Consolidation
         ---------------------------

          The consolidated  financial statements include the accounts of CMD and
          its  wholly-owned   subsidiary,   OMNI  Products,   Inc.,   originally
          incorporated in Oregon in 1993. OMNI Products,  Inc.  manufactures and
          distributes,   on  a   world-wide   basis,   a  variety   of   rubber,
          rubber/concrete  and concrete  railroad  grade crossing  systems.  All
          material  intercompany  transactions and balances have been eliminated
          in the consolidated financial statements.

     (c) Investments
         -----------

          The Company has adopted  Statement of Financial  Accounting  Standards
          No.  115  Accounting  for  Certain  Investments  in  Debt  and  Equity
          Securities (SFAS No. 115). Accordingly, the Company has classified its
          short-term    investments   in   corporate   equity    securities   as
          available-for-sale securities. The securities' carrying value is equal
          to market value.

     (d) Inventories
         -----------

          The Company values inventories at the lower of average production cost
          or market (net realizable  value).  The Company determines cost on the
          first-in, first-out (FIFO) basis.

     (e) Accounts Receivable
         -------------------

          Accounts  receivable are from  distributors of the Company's  products
          and customers. The Company performs periodic credit evaluations of its
          customers and maintains  allowances for potential credit losses. Also,
          to reduce the risk of credit  loss,  the Company  requires  letters of
          credit from  foreign  customers  for which no credit  history has been
          established.

     (f) Property, Plant and Equipment
         -----------------------------

          Property,  plant and  equipment  are stated at cost.  Depreciation  is
          provided  over the  estimated  useful  lives of the  assets  using the
          straight-line  method.  The  estimated  useful  lives  for  furniture,
          vehicles and equipment are ten years; buildings are forty years.

          Expenditures  for additions and major  improvements  are  capitalized.
          Expenditures  for  repairs  and  maintenance  are charged to income as
          incurred.

     (g) Organization Cost
         ------------------

          Organization costs are amortized over a five-year period.


                                                                     (Continued)
                                      F-9

<PAGE>
                                      


                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   Notes to Consolidated Financial Statements




     (h) Warranty
         --------

          The  Company  provides  a  six-year  warranty  for  its  products  and
          establishes  an  allowance  at the time of sale,  based on  historical
          warranty experience, to provide estimated warranty costs.

     (i) Income Taxes
         ------------

          The Company  accounts for income  taxes under the asset and  liability
          method.  Under the asset and liability  method,  deferred income taxes
          reflect the future tax  consequences  of  differences  between the tax
          bases of assets and liabilities and their financial  reporting amounts
          at each  year-end.  Deferred tax assets and  liabilities  are measured
          using  enacted tax rates  expected  to apply to taxable  income in the
          years  in  which  those  temporary  differences  are  expected  to  be
          recovered   or  settled.   The  effect  on  deferred  tax  assets  and
          liabilities  of a change in tax rates is  recognized  in income in the
          period that includes the enactment date.

     (j) Research and Development Costs
         ------------------------------

          The Company charges all research and development costs associated with
          the development of products to expense when incurred.

     (k) Advertising Expenses
         --------------------

          Advertising  expenses  are  charged to expense  as  incurred  and were
          $102,310 and $126,956 for 1997 and 1996, respectively.

     (l) Revenue Recognition
         -------------------

          Revenues are recognized when products are shipped.

     (m) Stock Option Plan
         -----------------

          Prior to May 1, 1996, the Company  accounted for its stock option plan
          in accordance with the provisions of Accounting Principles Board (APB)
          Opinion No. 25, Accounting for Stock Issued to Employees,  and related
          interpretations.  As such,  compensation  expense would be recorded on
          the date of grant only if the current  market price of the  underlying
          stock exceeded the exercise price. On May 1, 1996, the Company adopted
          SFAS No. 123, Accounting for Stock-Based  Compensation,  which permits
          entities to  recognize  as expense  over the  vesting  period the fair
          value of all stock-based  awards on the date of grant.  Alternatively,
          SFAS No. 123 also allows  entities to continue to apply the provisions
          of APB  Opinion  No. 25 and provide pro forma net income and pro forma
          earnings per share  disclosures  for employee stock option grants made
          in 1996 and future years as if the fair-value-based  method defined in
          SFAS No. 123 had been applied.  The Company has elected to continue to
          apply the  provisions  of APB Opinion No. 25 and provide the pro forma
          disclosure provisions of SFAS No. 123.


                                                                     (Continued)
                                      F-10

<PAGE>
                                       


                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




     (n) Fair Value of Financial Instruments
         -----------------------------------

          At April 30, 1997,  the  carrying  value of cash,  trade  receivables,
          accounts  payable and notes payable  approximate fair value due to the
          short-term  nature of these  instruments.  At April 30, 1997, the fair
          value of the Company's  long-term debt approximates  carrying value as
          such  instruments'  stated interest rates do not differ  significantly
          from current market rates.

     (o) Net (Loss) Earnings Per Common and Common Equivalent Share
         ----------------------------------------------------------

          Net (loss)  earnings per share is computed using the weighted  average
          number of common and dilutive common  equivalent  shares assumed to be
          outstanding  during the period  (using the  treasury  stock method for
          dilutive common equivalent  shares).  Common equivalent shares consist
          of  convertible  preferred  stock,  options  and  warrants to purchase
          common stock, which have been excluded from the computation of primary
          net (loss) earnings per share due to their anti-dilutive effect.

          The  transaction   between  CMD  and  OMNI  is  considered  a  reverse
          acquisition  for financial  statement  purposes and has been accounted
          for under the purchase method of accounting.  CMD's shares outstanding
          and dilutive equity instruments,  and convertible preferred stock, are
          included in the computation of common  equivalent shares from the date
          of acquisition.  As the acquisition was consummated on April 30, 1997,
          such share and  dilutive  equity  instruments  are not included in the
          computation  of common  equivalent  shares for the fiscal  years ended
          April 30, 1997 and 1996.

     (p) Use of Estimates
         ----------------

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles 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.


                                                                     (Continued)


                                      F-11

<PAGE>
                                     


                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




     (q) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
         -----------------------------------------------------------------------

          The Company adopted the provisions of SFAS No. 121, Accounting for the
          Impairment  of  Long-Lived  Assets  and for  Long-Lived  Assets  to be
          Disposed Of, on May 1, 1996.  This statement  requires that long-lived
          assets and certain identifiable intangibles be reviewed for impairment
          whenever events or changes in circumstances indicate that the carrying
          amount of an asset may not be recoverable. Recoverability of assets to
          be held and used is measured by a comparison of the carrying amount of
          an asset to future  net cash flows  expected  to be  generated  by the
          asset.  If such assets are considered to be impaired the impairment to
          be recognized  is measured by the amount by which the carrying  amount
          of the  assets  exceed  the fair  value of the  assets.  Assets  to be
          disposed of are reported at the lower of the  carrying  amount or fair
          value less costs to sell.  Adoption of this  statement  did not have a
          material  impact  on the  Company's  financial  position,  results  of
          operations, or liquidity.

     (r) Prior Period Adjustments
         ------------------------

          The accompanying  consolidated  financial  statements were prepared in
          connection  with  the  merger  agreement  discussed  in note  1(a) and
          present  for the  first  time the  combined  results  of OMNI and CMD.
          Certain   adjustments   were  made  to  record  certain  prior  period
          adjustments to the individual entities.  Prior period adjustments were
          made to inventory,  cost of sales,  accrued income taxes and provision
          for income taxes.

     (s) Reclassifications
         -----------------

          Certain  reclassifications  have  been  made to the  1996  amounts  to
          conform with 1997 presentation.

(2) Inventories
    -----------

     Inventories consist of the following at April 30, 1997:

         Raw materials                                            $    461,430
         Finished goods                                              2,183,313
                                                                  ------------

                                                                     2,644,743

         Less allowance for excess or obsolete
              inventory                                                150,000
                                                                  ------------

                      Inventories, net                            $  2,494,743
                                                                  ============
                                                              


                                                                     (Continued)

                                      F-12

<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




(3) Property, Plant and Equipment
    -----------------------------

     Property, plant and equipment consist of the following at April 30, 1997:

         Land                                                $    374,201
         Buildings                                              1,381,593
         Vehicles                                                  90,211
         Office furniture and equipment                           121,092
         Manufacturing equipment                                3,256,327
                                                             ------------

                                                                5,223,424

         Less accumulated depreciation                            936,768
                                                             ------------

                                                             $  4,286,656
                                                             ============

     Certain  property,  plant and equipment  serves as collateral for short and
     long-term debt obligations.

(4) Accrued Liabilities
    -------------------

     Accrued liabilities consist of the following at April 30, 1997:

         Warranties                                             $     344,950
         Accrued compensation                                         249,391
         Accrued merger costs                                         151,343
         Other                                                        404,920
                                                                 ------------

                                                                $   1,150,604
                                                                =============

(5) Notes Payable
    -------------

     The Company has a revolving line of credit totaling  $2,608,581 with Finova
     Capital  Corporation  (Finova)  that  generally  provides  borrowing  up to
     $2,750,000 against 85% of eligible accounts  receivable and 50% of eligible
     inventory.  Interest on the line is prime rate plus 2.25%  (10.75% at April
     30, 1997),  with a minimum  interest charge of $9,000 per month. The line's
     original maturity date was April 26, 1999.  However, on April 29, 1997, the
     Company was notified that the revolving  line of credit expires on July 31,
     1997.

     In addition, the Company has a term loan payable and a capital loan payable
     with Finova totaling  $1,153,702 and $614,440,  respectively,  at April 30,
     1997,  and are  payable in monthly  installments  of  $40,000  and  $8,500,
     respectively,  plus interest at 11.5% per annum per loan. The loans payable
     are secured by equipment  and  inventory.  The original  maturity  date was
     April 26, 1999.  However,  on April 29, 1997, the Company was notified that
     the loans expire on July 31, 1997.


                                                                     (Continued)

                                      F-13
<PAGE>


                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements



     The Company can extend the debt maturities to August 31, 1997 provided that
     the Company i) provides  Finova with a commitment  letter by July 31, 1997,
     issued by a new funding  source which  specifically  states that the Finova
     loans will be paid by August 31, 1997,  and ii) pays an extension fee equal
     to  one-quarter  percent  (1/4%) of the total  Finova  loans as of July 31,
     1997.

(6) Long-term Debt
    --------------

     Long-term debt is comprised of the following at April 30, 1997:

       Notes  payable to  Capital  Consultants  in
          monthly    installments    of   $13,631,
          including  interest  at 10%,  payable in
          full in December  1998,  secured by real
          estate                                                   $ 1,338,776
       Mortgage  payable to financial  institution
          in  monthly   installments  of  $12,750,
          including  interest at 11.375%,  payable
          in full in  December  1998,  secured  by
          real estate                                                1,230,000
        Note payable  to an  individual  in monthly
          installments  of  interest  only at 10%,
          plus additional "premium" interest at 7%
          due each May  15th,  payable  in full in
          April 1999                                                   200,000
         

       Note  payable  to  individuals  in  monthly
          installments  of  interest  only at 10%,
          payable  in full in April  1999                              107,500
                                                                  ------------

                                                                     2,876,276

         Less current portion                                           31,000
                                                                  ------------
                      Long-term debt, due in 1999                  $ 2,845,276
                                                                   ===========
                                                      
(7) Income Taxes
    ------------

     The income tax (benefit) expense consists of the following:
<TABLE>
<CAPTION>


                                                             1997            1996
                                                           --------        --------
         <S>                                               <C>              <C> 
           Current:
             Federal                                       $   --              --
             State                                             --              --
                                                           --------        --------

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

           Deferred:
             Federal                                        (46,039)         30,234
             State                                           (9,568)          6,283
                                                           --------        --------

                                                            (55,607)         36,517

               Total income tax (benefit) expense          $(55,607)         36,517
                                                           ========        ========

                                                                         (Continued)
</TABLE>

                                      F-14
<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




     The  tax  effects  of  temporary   differences   and  net  operating   loss
     carryforwards  which give rise to  significant  portions  of  deferred  tax
     assets and deferred tax liabilities at April 30, 1997 are as follows:

         Deferred tax assets:
             Investment in securities                            $ 232,418
             Warranty reserve                                      132,309
             Legal settlement reserve                              128,318
             Inventory reserve                                      57,534
             Bad debt reserve                                       14,523
             Self-insurance reserve                                  6,223
             Other                                                   1,994
             Net operating loss carryforwards:
                Federal                                            629,394
                State                                              130,810
                                                                 ---------

                                                                 1,333,523

         Less valuation allowance                                  490,416
                                                                 ---------
                   Net deferred tax asset                          843,107
                                                                 ---------
         Deferred tax liability:
             Property, plant and equipment, due to
                differences in depreciation                        651,327
             Real estate held for sale                             191,780
                                                                 ---------

                   Net deferred tax liability                      843,107
                                                                 ---------

                   Net deferred tax assets and liabilities       $    --
                                                                 =========  
                                                


                                                                     (Continued)

                                      F-15
<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




     The (benefit)  provision for income taxes differs from the amount of income
     tax determined by applying the applicable Federal statutory income tax rate
     to  (loss)  earnings  before  income  taxes  as a result  of the  following
     differences:

                                                        1997        1996
                                                        ----        ----

         Statutory federal income tax rate             (34.0)%      34.0%
         State income taxes, net of federal
              income tax benefit                        (4.4)        4.4
         Change in valuation allowance                  36.2        -
         Other                                          (2.1)      (14.7)
                                                       -----        ----

         Effective tax rates                            (4.3)%      23.7%
                                                       =====       =====

     The Company has a valuation  allowance of $490,416 and $-0-,  respectively,
     as of April  30,  1997 and 1996 an  increase  of  $490,416  and $-0- in the
     valuation allowance for the same respective periods ended.

     At April 30, 1997 and 1996,  the Company had  approximately  $1,982,000 and
     $899,000,  respectively,  of net  operating  loss  carryforwards  to offset
     future  income for federal and state income tax purposes  which will expire
     2010 through 2012.

     A  provision  of the Tax  Reform Act of 1986,  as  amended,  requires  that
     utilization  of net operating  loss and credit  carryforward  be limited to
     when  there is a more than 50% change in  ownership  of the  Company.  Such
     change in ownership may have occurred during the current fiscal year ended;
     however,  the amount subject to the limitation has not yet been determined.
     Accordingly,   the  utilization  of  the  net  operating  loss  and  credit
     carryforwards to remaining  future years may be limited.  Any future change
     in the equity structure of the Company may further limit the utilization of
     the net operating loss and credit carryforwards.


                                                                     (Continued)




                                      F-16
<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




(8) Commitments and Contingencies
    -----------------------------

     (a) Employment Contract Commitments
         -------------------------------

          The Company  has  entered  into  employment  contracts  with its chief
          executive  officer/chairman  and  president,  and  vice  president  of
          operations  through  1999  and  1998,  respectively,   with  automatic
          extensions  of  one-year  increments.  These  contracts  provide for a
          minimum  salary  with  annual  adjustments  based  on cost  of  living
          changes,  corporate and individual  performance  and general  business
          conditions.  At April 30, 1997,  the aggregate  future  commitment was
          $383,500.

     (b) Operating Lease Commitments
         ---------------------------

          The Company leases office space,  vehicles and office  equipment under
          various operating lease agreements  expiring over several years. Lease
          expense was  approximately  $108,000  and $105,000 for the years ended
          April 30, 1997 and 1996,  respectively.  Future minimum lease payments
          under non-cancelable lease agreements are as follows:

           Year ended April 30:
                1998                                      $   88,582
                1999                                          65,800
                2000                                          66,100
                2001                                          66,300
                2002                                          66,650
                                                            --------

                                                          $  353,432
                                                          ==========

     (c) Purchase Commitment
         -------------------

          The Company has a commitment  to purchase all  retreading  buffings at
          $108 per ton produced by a retread  manufacturer  through December 31,
          1998.  Purchases  under a  similar  purchase  agreement  with the same
          manufacturer totaled approximately $225,000 and $298,000 for the years
          ended April 30, 1997 and 1996, respectively.


                                                                     (Continued)
                                      F-17

<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




     (d) Royalty Agreements
         ------------------

          The Company acquired a royalty agreement with Red Hawk Rubber Co. (Red
          Hawk),  from Riedel OMNI Rubber Products,  Inc. The Red Hawk agreement
          provides  that  the  Company  pay a 5%  royalty  on all net  sales  of
          products  that were being  manufactured  at the time the agreement was
          signed until June 1999. Any new products developed and manufactured by
          OMNI are not subject to the Red Hawk royalty agreement.

     (e) Medical Claims
         --------------

          The Company is self-insured  for the cost of medical  coverage up to a
          maximum of $15,000 per  individual per year. The Company has an excess
          coverage  insurance  providing for claims over $15,000 per  individual
          per year.

     (f) Litigation
         ----------

          The Company is involved in various claims and legal actions arising in
          the ordinary  course of business.  In the opinion of  management,  the
          ultimate disposition of these matters will not have a material adverse
          effect on the Company's  consolidated  financial position,  results of
          operations or liquidity.

(9) Stockholders' Equity
    --------------------

     (a) Convertible Preferred Stock Series B
         ------------------------------------

          The Company has  authorized  1,000,000  shares of Series B convertible
          preferred  stock,  of which  622,066 are issued and  outstanding.  The
          terms of these shares are as follows:

          Voting
          ------

          Each share of Series B convertible preferred stock, until converted or
          canceled,  has the right to one vote equivalent to one share of common
          stock into which such preferred series could be then converted.

          Conversion
          ----------

          Each  share  of  Series  B  convertible   preferred   stock  shall  be
          convertible  to a like number of common shares if the Company  reports
          gross annual  revenues of $20,000,000  or annual  pre-tax  earnings of
          $1,500,000  during either of the fiscal years ending April 30, 1998 or
          1999.  If  conversion  standards  have  not  been  met,  the  Series B
          preferred  stock shall be canceled by the Company upon the issuance of
          its  fiscal  year  ended  April  30,   1999   consolidated   financial
          statements.


                                                                     (Continued)
                                      F-18

<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements



     (b) Stock Options
         -------------

          OMNI's 1995 Stock Incentive Plan (the 1995 plan) provides for granting
          to employees  and  consultants  of either  incentive  stock options or
          non-qualified  stock options.  Incentive stock options must be granted
          at an exercise  price not less than 100% of the fair market  value per
          share at the grant date. Non-qualified stock options generally must be
          granted at an exercise  price of not less than 100% of the fair market
          value per share at the grant date,  although  in certain  cases may be
          granted  at 85%.  The term of options  granted  under the 1995 plan is
          generally ten years, but in certain cases may be five years. The right
          to exercise  options  granted is  generally  fully vested on the grant
          date.

          The per share  weighted  average fair value of stock  options  granted
          during  1996 was $.10 on the date of grant  using  the  Minimum  Value
          option-pricing  model with the following weighted average assumptions:
          expected divided yield 0%, risk-free interest rate of 7%, and expected
          life of ten years. No options were granted during 1995.

          The Company applies APB Opinion No. 25 in accounting for its Plan and,
          accordingly,  no  compensation  cost has been recognized for its stock
          options  in the  financial  statements.  The pro forma  effects on net
          (loss)  earnings of applying  SFAS No. 123 were not  material  for the
          years ended December 31, 1996 and 1995.

          In January  1994,  CMD  adopted an  employee  stock  option plan which
          provided  for  the  issuance  of  incentive  and  non-qualified  stock
          options.  In April 1997,  in connection  with the merger,  the Company
          adopted an Amended and Restated 1994 Stock Option Plan (1994 plan).

          The merger  agreement  calls for the  exchange  of options in the 1995
          plan for options in the 1994 plan.  For each stock  option  exchanged,
          option holders under the 1995 plan received  substitute options in the
          1994 plan to purchase such number of CMD common and  preferred  shares
          as the holder of the OMNI options  would have received had the options
          been exercised in full immediately prior to the merger's closing.  The
          terms and conditions of the 1994 plan are  essentially the same as the
          1995 plan. The substitute  options are subject to the final  ownership
          adjustment discussed in note 1(a).


                                                                     (Continued)

                                      F-19
<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




          The following table presents  historic stock option activity under the
          1995 plan, converted into substitute options, and the combining effect
          with CMD options outstanding under the 1994 plan:

<TABLE>
<CAPTION>
                                                                                    Weighted
                                                                                      average
                                                                 Number              exercise
                                                                of shares              price
                                                             ------------           ---------
<S>                                                           <C>                   <C>     
           Options outstanding at April 30, 1995                  651,370           $   0.69

           Granted                                                   -                   -
           Exercised                                                 -                   -
           Forfeited                                                 -                   -
           Expired                                                   -                   -
                                                             ------------           --------

           Options outstanding at April 30, 1996                  651,370               0.69

           Granted                                              1,236,289               0.83
           Exercised                                                 -                   -
           Forfeited                                              (48,061)             (0.69)
           Expired                                                   -                   -
           CMD options outstanding at time of merger              255,000               1.68
                                                             ------------           --------

           Options outstanding at April 30, 1997                2,094,598           $   0.89
                                                             ============           ========
</TABLE>

          The  Company  reserved  3,000,000  shares of common  stock and 500,000
          shares of preferred  stock for issuance  under the 1994 plan. At April
          30, 1997, there were 905,402 shares available for grant under the 1994
          plan.

          At April 30, 1997, the range of exercise  prices and weighted  average
          remaining  contractual life of outstanding options under the 1994 plan
          was $0.25-$5.00 and 8.03 years, respectively.

          At April 30, 1997 and 1996,  the number of options  exercisable  under
          the  1994  plan  was  2,094,598  and  651,370,  respectively,  and the
          weighted  average exercise price of those options was $0.89 and $0.69,
          respectively.


                                                                     (Continued)

                                      F-20


<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




     (c) Warrants Outstanding
         --------------------

          The following table presents  warrants  outstanding at April 30, 1997,
          all of which were issued by CMD in consideration for service rendered,
          debt and debt restructuring, and stock purchases and placements:

              Number of        
               common
               shares               Exercise                Expiration
              issuable                price                    date
              --------             ----------              --------------

                20,000             $    2.50                 May 31, 1997
                76,000                  0.75                 May 31, 1997
               100,000                  0.35                March 1, 1998
                52,500                  6.05                 May 13, 1998
                46,250                  0.35                 May 31, 1998
                10,000                  0.75                 May 31, 1998
                10,000                  1.50                 May 31, 1998
               603,750                  6.50                 May 13, 1999
                50,000                 10.00               April 14, 2000

(10) Major Customers and Credit Concentration
     ----------------------------------------

     The  Company  does  business  with  and  extends  credit  to a  variety  of
     commercial  customers,  including all of the major  railroads in the United
     States,  major cities and  municipalities  throughout the United States and
     Canada, and state-owned railroads throughout Europe and Asia.

     The Company sells products to customers  primarily in the United States. On
     April 30, 1997, $1,077,000 (59%) of the trade receivables were concentrated
     within  the  domestic  railroad  industry,  and  $255,000  (14%)  of  trade
     receivables  were  with  companies  and  distributors  located  in  foreign
     countries.  Although the Company does not  currently  foresee a credit risk
     associated with the foreign  receivables,  repayment is somewhat  dependent
     upon the financial stability of those countries' national economics.

     Sales to domestic railroads were  approximately  $7,822,000 and $8,690,000,
     or 61% and 64% of total sales, for the years ended April 30, 1997 and 1996,
     respectively.  Sales to the Company's  largest customer were  approximately
     $2,220,000  and  $1,986,000,  or 17% and 15% of total sales,  for the years
     ended April 30, 1997 and 1996,  respectively.  Sales to the Company's  five
     largest customers were approximately $5,560,000 and $5,665,000,  or 43% and
     42% of  total  sales,  for  the  years  ended  April  30,  1997  and  1996,
     respectively.


                                                                     (Continued)

                                      F-21
<PAGE>


                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




(11) Going Concern
     -------------

     As  reflected  in  the  accompanying  financial  statements,  current  debt
     maturities and other short-term  commitments  exceeded the Company's liquid
     assets  available to repay such  commitments.  This is due primarily to the
     unexpected  acceleration  of  certain  debt  maturities.  To  finance  debt
     maturities,  management  has and will continue to seek both debt and equity
     investors to provide additional capital.

(12) Subsequent Event
     ----------------

     (a) Sale-leaseback
         --------------

          On May 21, 1997,  under a sale and  leaseback  agreement,  the Company
          sold its manufacturing  facility in Portland,  Oregon for $560,000 and
          leased it back under a  five-year  lease  agreement.  The  transaction
          produced a gain of  approximately  $83,000  which will be deferred and
          amortized  ratably  over  the  life of the  lease.  A  portion  of the
          proceeds  from the  sale  were  used to  retire  $423,773  in debt and
          accrued interest.

          The lease is an operating  lease with future minimum lease payments as
          follows:

           Year ended April 30:
                1998                                          $    86,496
                1999                                               86,496
                2000                                               86,496
                2001                                               86,496
                2002                                               86,496
                                                              -----------

                      Total minimum lease payments            $   432,480
                                                              ===========

     (b) Put Agreement
         -------------

          The Company has a stock put agreement with four individuals,  three of
          whom are board members. Under the agreement,  holders of the put could
          require the Company to purchase  111,741  shares valued at $134,285 in
          June 1997. In June 1997,  the Company  repurchased  23,774 shares at a
          value of $28,571,  while the holders of the  remaining  87,967  shares
          required the Company to repurchase  such shares at a value of $120,962
          on October 3, 1997.

     (c) Legal Settlement
         ----------------

          On July 24, 1997,  the Company  entered  into a  settlement  agreement
          arising from disputed  royalty  payments.  The terms of the settlement
          agreement  require the Company  pay $50,000  within  sixty days of the
          agreement  date and $20,000  per  quarter  for five years  thereafter.
          Management has reserved the discounted present value of the settlement
          at April 30, 1997.



                                      F-22

<PAGE>




Item 8   Changes In And Disagreements With Accountants On Accounting And
         Financial Disclosure
         -----------------------------------------------------------------------

     (a) (i) On July 22, 1997,  the  Registrant's  board of directors  adopted a
     resolution to change independent accountants from Perry-Smith & Co. to KPMG
     Peat Marwick LLP ("KPMG") because the Company's previously announced merger
     transaction  with OMNI  International  Rail Products,  Inc.  ("OMNI") which
     closed  April 30,  1997  resulted  in  Registrant's  principal  office  and
     operations being outside the regional area served by Perry-Smith & Co.

          (ii) The principal  accountant's report for the last two years did not
     contain an adverse opinion or a disclaimer of opinion and was not qualified
     or modified as to uncertainty, audit scope, or accounting principles.

          (iii) The decision to change  accountants was approved by the board of
     directors.

          (iv) There were no  disagreements  with the former  accountant  on any
     matter  of  accounting   principles  or  practices,   financial   statement
     disclosure, or auditing scope or procedure,  which disagreement(s),  if not
     resolved to the satisfaction of the former accountant, would have caused it
     to  make  reference  to  the  subject  matter  of  the  disagreement(s)  in
     connection with its report.

          (v) None of the events listed in paragraphs  (a)(1)(iv) of Item 304 of
     Regulation S-K has occurred.

     (b) On July 22,  1997,  the  Registrant's  board  of  directors  adopted  a
     resolution to change independent accountants from Perry-Smith & Co. to KPMG
     for the  reasons  described  above.  Prior  to the  closing  of the  merger
     transaction, KPMG provided OMNI limited accounting services.

                                    PART III

Item 9  Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16 (a) in the Exchange Act.
        ------------------------------------------------------------------------

          The executive officers and directors of the Company are as follows:


        NAME                   AGE                     POSITION

Michael L. DeBonny              57             Chairman of the Board,
                                               CEO, President and Treasurer


                                       11

<PAGE>

        NAME                   AGE                     POSITION



Edward S. Smith                 78             Director

Joseph J. Barclay               64             Director

Richard A. Kreitzberg           63             Director

John E. Hart                    58             Director

Ronald G. Nutting               67             Vice President and Secretary

Bryan L. Holland                39             Vice President -  Manufacturing

Robert E. Tuzik                 46             Vice President - Sales &
                                               Marketing

Jeffrey A. Edwards              50             Chief Financial Officer



Each  director is elected  for a period of one year and serves  until his or her
successor is duly  elected by the  stockholders.  The Board of Directors  has no
committees.

The principal occupations of each director and executive officer of the Company,
for at least the past five years, are as follows:

Michael L. DeBonny has been  chairman of the Board of  Directors  and CEO of the
Company  since  closing of the merger with OMNI on April 30,  1997.  He had been
Chairman  of the  Board of  Directors  and CEO of OMNI from  April,  1994 to the
closing.  Prior  to the  acquisition  of OMNI in April  1994,  Mr.  DeBonny  was
president of BHP Rail Products, Inc. and BHP Rail Products (Canada),  Ltd., both
divisions of Broken Hill Proprietary Co., Ltd. Mr. DeBonny is a Certified Public
Accountant and holds B.B.A.
and MBA degrees from the University of Portland.

Edward S. Smith has been a director of the Company  since  closing of the merger
with OMNI on April 30,  1997.  He had been a  director  of OMNI from 1994 to the
closing of the merger. Mr. Smith is  President/Owner of Ted Smith & Company.  He
is the former  chairman  and CEO of Omark  Industries,  Inc.,  an  international
manufacturer of cutting chain for chain saws, hydraulic log loaders and sporting
ammunition.   His  business  activity  during  the  last  five  years  has  been
concentrated on private investing and board memberships.  Currently he serves on
the Board of Directors of Georgia Gulf Corporation and Expert Systems Publishing
Company.


                                       12

<PAGE>



Joseph J. Barclay has been a director of the Company since closing of the merger
with OMNI on April 30,  1997.  He had been a  director  of OMNI from 1996 to the
closing of the merger. Mr. Barclay has been with Cascade Corporation,  a leading
international  manufacturer of materials  handling  equipment  headquartered  in
Portland,  Oregon since 1968. He has served as a director of Cascade since 1972,
president and CEO from 1973 and as chairman since 1993.  Mr.  Barclay  currently
serves on the Board of  Directors of Granite  Construction  Company,  Inc.,  and
Columbia  Machine  Corporation.  Mr.  Barclay  holds a BS degree  in  industrial
engineering from Illinois Institute of Technology.

Richard A.  Kreitzberg  has been a director of the Company  since closing of the
merger with OMNI on April 30, 1997.  He had been a director of OMNI from 1994 to
the closing of the merger.  From 1980 to 1995 Mr. Kreitzberg served as President
of  Microflect,  Inc. He is currently  serving as chairman of the Salem Hospital
Board of Trustees.

Ronald G. Nutting has been Executive Vice President and Secretary of the Company
since closing of the merger with OMNI on April 30, 1997.  He had been  Executive
Vice  President  and  Secretary  of OMNI from 1994 to the closing of the merger.
From 1983- 1994 Mr.  Nutting served as President of OMNI. Mr. Nutting holds a BS
degree in Engineering Geology from Oregon State University.

John E. Hart has been a director of the Company since closing of the merger with
OMNI on April 30, 1997. Prior to the merger,  he had been general counsel to CMD
since October 1993 and its Secretary and Treasurer  since June,  1994. From 1985
to 1994 he was  engaged in the  private  practice  of law.  He  resumed  his law
practice in May,  1997.  Mr. Hart holds a J.D.  degree  from the  University  of
Southern California and a BA degree from the University of Redlands.

Bryan Holland has been Vice President of Operations of the Company since closing
of the  merger  with  OMNI on April 30,  1997.  He had been  Vice  President  of
Operations  of OMNI from 1989 to the  closing  of the  merger.  He holds a BA in
Business Administration from Linfield College.

Robert E. Tuzik has been Vice  President  - Sales and  Marketing  of the Company
since  closing  of the  merger  with  OMNI on April 30,  1997.  He had been Vice
President - Sales and  Marketing  from 1996 to the  closing of the merger.  From
1995 to 1996 he owned and operated  Talus  Associates,  specializing  in railway
marketing and media  relations.  Prior to that he spent six years as engineering
editor of Railway Track and  Structures,  a railroad  engineering  journal.  Mr.
Tuzik holds a BA in English and MS in Journalism from the University of Illinois
at Chicago and Northwestern University.

Jeffrey A. Edwards has been Chief Financial Officer of the Company since closing
of the merger with OMNI on April 30, 1997. He had been Chief  Financial  Officer
of OMNI  from  January  1997 to  closing  of the  merger.  From  1992 to 1997 he


                                       13

<PAGE>



operated Profit  Technology  Systems doing financial and management  consulting.
Prior to that he spent four years as  Division  Finance  Director  with  Wendy's
International  . He is a Certified  Public  Accountant  and holds a BS degree in
Finance from the University of Oregon and an MBA from Portland State University.

Item 10 Executive Compensation

The following table sets forth  remuneration paid to certain executive  officers
for the fiscal years ended April 30, 1996 and April 30, 1997, respectively:

<TABLE>
<CAPTION>

                                     SUMMARY COMPENSATION TABLE

                                                                                          Long-Term
                                          Annual Compensation                            Compensation
                               ------------------------------------------      ---------------------------------

                                                                 Other
                               Year                              Annual
                               Ended                             Compen-        Options       LTIP     All other
Name and Principal Position    April 30     Salary    Bonus      sation           SARs       Payments     Comp.
---------------------------    --------     ------    ------    ---------      ----------   ---------- ----------

<S>                            <C>          <C>          <C>         <C>         <C>              <C>       <C>
Michael L. DeBonny             1997         151,814      0           0           618,144          0         0
CEO, President                 1996         120,918    8,026         0               0            0         0
and Treasurer                  1995         120,457      0           0           324,525          0         0

Ronald G. Nutting              1997         106,544      0           0              0             0         0
Executive Vice President       1996          88,179    5,538         0              0             0         0
and Secretary                  1995          87,803      0           0              0             0         0
</TABLE>



          The  Company's  nonsalaried  directors  receive  $1,000 for each Board
          meeting  attended   together  with   reimbursement  for  out-of-pocket
          expenses in attending Board meetings.

Item 11  Security Ownership of Certain Beneficial Owners and Management
         --------------------------------------------------------------

          The following table sets forth certain information with respect to the
          beneficial  ownership  of the  Company's  Common  Stock as of the date
          hereof,  by (i) each  person  who is known  by the  Company  to own of
          record or  beneficially  more than 5% of the  Company's  Common Stock,
          (ii) each of the  Company's  directors  and (iii)  all  directors  and
          officers of the  Company as a group.  The  stockholders  listed in the
          table  have sole  voting and  investment  powers  with  respect to the
          shares indicated.



                                       14

<PAGE>


     Name and Address of                  Number of
   Beneficial Owner(1)(2)               Shares Owned                 Percent of
   ----------------------               ------------                 ----------
            Class
            -----

   Joseph Barclay (2) (3)                   30,907                        *
   c/o Cascade Corporation
   2020 SW 4th Avenue
   Portland, OR 97201

   Michael L. DeBonny (4)                1,625,627                      24%
   16101 Parelius Circle
   Lake Oswego, OR 97034

   John E. Hart (5)                        103,039                     1.5%
   Box 2495
   Grass Valley, CA 95945

   Richard A. Kreitzberg (6)               834,643                    12.3%
   3332 El Dorado Loop South
   Salem, OR 97032

   Edward S. Smith (7)                     572,087                     8.4%
   921 SW Washington St., Ste. 762
   Portland, OR 97205

   Ronald J. Gangemi (8)                   447,788                     6.6%
   11950 Willow Valley Road
   Nevada City, CA 95959

   All officers and directors            3,603,859                    53.2%
   as a group (8 persons)

*Less than 1%
----------

(1)  Assumes no exercise or conversion of (i) common stock purchase warrants and
     underwriter's warrants issued in conjunction with the Company's 1994 public
     offering, outstanding warrants, options or other commitments of the Company
     that are convertible into or exercisable for shares of Common Stock, except
     that  Common  Stock  obtainable  by persons  named in the above  table upon
     exercise of options is deemed  outstanding and  beneficially  owned by such
     persons in calculating  their  percentage  ownership;  or (ii) the Series B
     Preferred Stock.

(2)  Does not  include  shares of Series B  Preferred  Stock  held by the person
     listed.

                                       15

<PAGE>


(3)  Includes  options held by Mr.  Barclay to purchase  30,907 shares under the
     Company's Incentive Stock Option Plan.

(4)  Includes  options held by Mr. DeBonny to purchase  942,670 shares under the
     Company's Incentive Stock Option Plan.

(5)  Includes  options  held by Mr. Hart to  purchase  50,000  shares  under the
     Company's Incentive Stock Option Plan.

(6)  Includes shares owned by Mr.  Kreitzberg's  spouse.  Also includes  options
     held by Mr.  Kreitzberg  to  purchase  30,907  shares  under the  Company's
     Incentive Stock Option Plan

(7)  Includes  options  held by Mr.  Smith to purchase  92,722  shares under the
     Company's Incentive Stock Option Plan.

(8)  Includes shares owned by Mr. Gangemi's spouse and children.

Item 12  Certain Relationships and Related Transactions
         ----------------------------------------------

          Between  February 28 and May 2, 1995, the Company  borrowed,  on short
          term notes, a total of $200,000 from four investors, including $25,000
          from Mr.  Gangemi.  The  interest on the Gangemi  loan was at the rate
          that he was  required to pay the bank from which he borrowed the funds
          to make the loan.  The  interest on the other  $175,000 was at 10% per
          annum.  As  additional   consideration  for  the  loans,  the  lenders
          received,  pro rata, warrants to purchase a total of 100,000 shares of
          the Company's common stock,  exercisable  until March 1, 1998, at $.35
          per share.

          In February, 1997, three OMNI directors (Messrs.  DeBonny,  Kreitzberg
          and  Smith)  purchased  shares in OMNI for a total of $99,617 at $3.50
          per share. Simultaneously,  put agreements were executed requiring the
          Company to purchase  those shares at a price  equivalent  to $4.00 per
          share 120 days following the investment.  Mr. Kreitzberg exercised his
          put and his shares were  repurchased in June, 1997. The put agreements
          with  Messrs.  DeBonny  and Smith were  extended  120 days and the put
          price  increased to the equivalent of $4.25 per OMNI share, or a total
          of $88,272.

          In March,  1997,  OMNI  entered  into a short  term  equipment  rental
          agreement with one of its directors, Edward S. Smith.

          As a  condition  of the  merger  transaction  with OMNI,  the  Company
          entered into agreements with Messrs.  Hart and Gangemi to exchange all
          of  their  Series  A  preferred   stock  (60,000  and  750,000  shares
          respectively) for 20,000 and 250,000 shares, respectively, of Series B
          preferred stock.

                                       16

<PAGE>




          Management  is of the opinion that all  transactions  described  above
          between the Company and its officers,  directors or stockholders  were
          on terms at least as fair to the Company as had the transactions  been
          concluded  with  an  unaffiliated  party.  All  material  transactions
          effected in the future between the Company and its officers, directors
          and principal  stockholders  will be subject to approval by a majority
          of the  Company's  outside  directors  not having an  interest  in the
          transaction.

Item 13  Exhibits and Reports on Form 8-K

a.  The Exhibits listed on the accompanying Index of Exhibits are filed as 
    part of this annual report.

b.  No reports on Form 8-K were filed during the quarter ended April 30, 1997.

                                Index of Exhibits
                                -----------------



Exhibit #                          Description
---------                          -----------

1.01          Form of Underwriting Agreement with Oak Ridge Investments, Inc.
              (1)

1.02          Form of Selected Dealers Agreement (1)

1.03          Form of Representative's Warrant (1)

1.04          Consulting Contract (1)

2.01          Certificate of Incorporation of the Registrant (1)

2.02          Bylaws of the Registrant (1)

2.03          Migratory Merger Agreement (1)

2.04          Bylaws of the Registrant as amended December 10, 1994 (1)

2.05          Certificate of Designation of Preferences of Series B Preferred
              Shares

4.01          Form of Warrant Agreement (1)

5.01          Opinion of John Hart, Esq., regarding legality of the Common Stock
              and Warrants (includes Consent) (1)

10.01         Incentive Stock Option Plan (1)

10.02         Employment Agreement (Mr. Gangemi) (1)

10.03         Agreement with LBI general partnership (1)


                                       17

<PAGE>

10.04         Employment Agreement (Mr. Hart) (2)

10.05         Gish Biomedical, Inc. Asset Purchase Agreement, dated September
              13, 1995 (4)

10.06         Merger Agreement and Plan of Reorganization (5)

10.07         Letter from Perry-Smith & Co. (former accountant dated July 24,
              1997) pursuant to Item 304 (a) (3) of Regulation S-K (6)

10.08         Employment Agreement (Mr. DeBonny)

11.01         Statement of Computation of Per Share Loss (1)

11.02         Statement of Computation of Per Share Loss (1)

11.03         Statement of Computation of Per Share Loss (1)

11.04         Statement of Computation of Per Share Loss (2)

24.01         Consent of Perry-Smith & Co. (1)

24.02         Consent of John Hart, Esq. (See 5.01, above.) (1)

24.03         Consent of Gary A. Agron (1)

24.04         Consent of Perry-Smith & Co. (1)

24.05         Consent of Perry-Smith & Co. (1)

24.06         Consent of Perry-Smith & Co. (1)

24.07         Consent of Perry-Smith & Co. (3)

27.01         Financial Data Schedule--September 30, 1996 (7)

27.02         Financial Data Schedule--December 31, 1996 (7)

27.03         Financial Data Schedule--March 31, 1997 (7)

27.04         Financial Data Schedule--April 30, 1997


(1)  Previously filed as part of the Company's SB-2 Registration Statement filed
     on February 11, 1994, as amended and effective on May 13, 1994.

(2)  Previously  filed as Exhibits to the Company's Annual Report on Form 10-KSB
     for the fiscal year ended September 30, 1994.


                                       18

<PAGE>



(3)  Previously  filed as an Exhibit to the Company's Post  Effective  Amendment
     No. 1 to Form  SB-2  Registration  Statement  filed on March  10,  1995 and
     effective on March 28, 1995.

(4)  Previously filed as an Exhibit to the Company's Preliminary Proxy Statement
     filed October 24, 1995.

(5)  Previously filed as an Exhibit to the Company's Form 8-K filed May 2, 1997.

(6)  Previously  filed as an  Exhibit to the  Company's  Form 8-K filed July 30,
     1997.

(7)  Previously  filed as an Exhibit to the Company's annual or quarterly report
     for the period ending the indicated date.


                                       19

<PAGE>


                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                      Creative Medical Development, Inc.
                                                 (Registrant)


                                      By /s/  MICHAEL L. DEBONNY
                                         ---------------------------------------
                                                 (Signature and Title)
                                                  Michael L. DeBonny
                                          Chief Executive Officer and Director

                                      Date    August 12, 1997
                                              ----------------------------------

     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.


By /S/  JEFF EDWARDS                          By  /S/  JOSEPH J. BARCLAY
   -------------------------------              --------------------------------
       (Signature and Title)                       (Signature and Title)
           Jeff Edwards                           Joseph J. Barclay, Director
      Chief Financial Officer

Date  August 12, 1997                        Date   August 12, 1997
     ------------------------------                -----------------------------

By  /S/  JOHN E. HART
   --------------------------------
        (Signature and Title)
       John E. Hart, Director

Date  August 12, 1997


                                       20