UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB

(Mark One)

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

       For the fiscal year ended September 30, 1996

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

      For the transition period from              to
                                     ------------    ---------------

Commission file number    Securities Act Registration No. 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
incorporation or organization)                         Identification No.)


   870 Gold Flat Road, Nevada City, CA                          95959
----------------------------------------                    --------------
(Address of principal executive offices)                     (Zip Code)

Issuer's telephone number        (916)  478-0740
                                 -----------------


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 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 reauired to file such reports), and (2) has been subject
to such filing requirements for the past 90 days Yes [ X ] No [ ]

<PAGE>




Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosures  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ].

State issuer's revenues for its most recent fiscal year.    -0-
                                                         ----------------------

State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days,  (See  definition of affiliate in Tule 12b-02 of the Exchange  Act). As of
December 31, 1996 average of Bid and asked price was $.40.  Common stock held by
non affiliates was 1,577,318 with aggregate market value of $630,827.

Note:  If  determining  whether  a  person  is  an  affiliate  will  involve  an
unreasonable  effort and expense,  the isuer may calculate the aggregate  market
value of the common  equity held by  non-affiliates  on the basis of  reasonable
assumptions, if the assumptions are stated.

    (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

     Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes [ ] No [ ]

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares  outstanding of each of the sisuer's  classes of
common equity, as of the latest practicable date.

As of 12/31/96  2,084,745 shares $.01 Par Value Common


                      DOCUMENTS INCORPORATED BY REFERENCE

     If the following documents are incorporated by reference,  briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated;  (1) any annual report to security  hooders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities  Act"). The listed
documents should be clearly described for identification  purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).

     Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ ]

<PAGE>

                                                        

                       CREATIVE MEDICAL DEVELOPMENT, INC.
                                   FORM 10-KSB
           ANNUAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996

                                      INDEX

<TABLE>
<CAPTION>

<S>                <C>                                                           <C>    
PART I

    Item 1.       Description of Business .......................................   1

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

    Item 3.       Legal Proceedings .............................................   2

    Item 4.       Submission of Matters to a Vote of Security Holders ...........   2

PART II

    Item 5.       Market for Common Equity and Related Stockholder Matters ......   3

    Item 6.       Management's Discussion and Analysis of Financial Condition
                  and Results of Operations .....................................   3

    Item 7.       Financial Statements
                      Independent Auditor's Report ..............................  F-1
                      Consolidated Balance Sheets ...............................  F-2
                      Consolidated Statements of Operations .....................  F-3
                      Consolidated Statements of Shareholders' Equity (Deficit) .  F-4
                      Consolidated Statements of Cash Flows .....................  F-5
                      Notes to Consolidated Financial Statements ................  F-6

    Item 8.       Changes In And Disagreements With Accountants On
                  Accounting And Financial Disclosure ...........................   6

PART III

    Item 9.       Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) in the Exchange Act .............   6 

    Item 10.      Executive Compensation ........................................   7

    Item 11.      Security Ownership of Certain Beneficial Owners and Management    8   

    Item 12.      Certain Relationships and Related Transactions ................   9  

    Item 13.      Exhibits and Reports on Form 8-K ..............................   10 

Index of Exhibits.................................................................  11

Signatures........................................................................  13

</TABLE>


<PAGE>

                                     PART I

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

     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).  At a
     special meeting of stockholders held February 21, 1996, the transaction was
     approved and it closed April 17, 1996.

     Since the closing of the Gish transaction, the Company has had no full time
     employees and no business  activity  except  concluding  the transition and
     accounting for the interim  operations between September 13, 1995 and April
     17, 1996,  managing its real estate,  corporate  governance  and compliance
     matters.

     At December 31, 1996, the Company had no full time employees.

     In August  1993 the  Company  acquired  a 99%  interest  in LBI,  a general
     partnership  which owns the real  estate  and  building  which the  Company
     utilizes as its office and rents to others.  

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

     The Company's  office is located in a facility owned by it at 870 Gold Flat
     Road, Nevada City, California 95959. The facility consists of two buildings
     with a total of approximately 30,000 square feet.  Approximately 95% of the
     space is leased to others.  Management  considers  that the  facilities are
     well maintained and sufficient for the Company's  present  operations.  The
     current  financing of the building has a principal balance in the amount of
     $1,234,656,  as of  December  31,  1996,  which is payable on a twenty year
     amortization  schedule ($12,750/Mo) with a balloon payment due December 21,
     1998.


                                        1

<PAGE>



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

     On July 30, 1992, Keller Medical, Inc. ("Keller"), a company which employed
     Mr.  Gangemi as the general  manager of one of its divisions and upon whose
     Board of Directors Mr.  Gangemi  served,  filed a civil action  against Mr.
     Gangemi alleging,  among other things, that Mr. Gangemi improperly acquired
     trade  secrets and  proprietary  information  of Keller  while  employed by
     Keller.  The  action did not  include  the  Company  as a party  defendant,
     although the Company  subsequently  elected to join as a cross complainant,
     filing claims against Keller. Although a settlement was reached between Mr.
     Gangemi  and Keller in July 1993,  whereby Mr.  Gangemi  agreed to purchase
     from  Keller  certain  medical  technology  not  related  to the  Company's
     products, Keller filed for bankruptcy in November 1993, thereby staying the
     litigation and suspending consummation of the settlement agreement.

     While  Keller has not pursued its claims in  bankruptcy  court or elsewhere
     against  Mr.  Gangemi  and  has  not  included  the  Company  in any of the
     allegations  in its  complaint,  nevertheless  should Keller  reinstate the
     civil  action and should it be  successful  in  claiming  that Mr.  Gangemi
     obtained  trade secrets or proprietary  information  from Keller during Mr.
     Gangemi's employment,  Keller might subsequently be in a position to make a
     claim against the Company for trade secrets or  proprietary  information it
     might allege Mr. Gangemi  provided to the Company.  The Company believes it
     is unlikely  that  Keller  will pursue any action  against it and even more
     unlikely  that  Keller  would  prevail  with any such claim.  Although  the
     possibility is remote, the loss of any such litigation would materially and
     adversely affect the Company.

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.



                                        2

<PAGE>

                                     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.  The stock was delisted on May 11, 1995 and now trades on
     the Electronic Bulletin Board under the symbol "CMDI".

-------------------------------------------------------------------------------
                     Quarterly Common Stock Bid Price Ranges
-------------------------------------------------------------------------------
                              1995                               1996
-------------------------------------------------------------------------------
   Quarter            High             Low              High             Low
-------------------------------------------------------------------------------
     1st              4.75             2.50             .313            .125   
-------------------------------------------------------------------------------
     2nd              2.50             1.12             .313            .125
-------------------------------------------------------------------------------
     3rd              .375             .375             .40             .125 
-------------------------------------------------------------------------------
     4th              .375             .375             .563            .188   
-------------------------------------------------------------------------------

     At  December  31,  1996,  the  Company  had  approximately  350  record and
     beneficial stockholders.

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


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

     Background

     From its founding in July, 1992,  through  completion of the Initial Public
     Offering  (IPO),  May 13, 1994, the Company's  operations  have been funded
     primarily  by equity  capital  and debt  financing  provided  by  principal
     shareholders and private investors.  During the Company's development stage
     and through the end of the fiscal year ended  September  30,  1995,  losses
     were incurred as costs of  designing,  developing,  testing,  producing and
     marketing  the  Company's  initial  products  and  administrative  overhead
     exceeded revenues generated from product sales.

     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.

                                        3

<PAGE>

     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).  At a  special  meeting  of
     stockholders  held February 21, 1996, the  transaction  was approved and it
     closed April 17, 1996.

     Results of Operations
     ---------------------

     Because Gish assumed  operating  control of the purchased  assets as of the
     date of the agreement,  September 13, 1995,  and all  operations  from that
     date to the closing  April 17,  1996,  were at their  expense and for their
     account, the Company had no manufacturing operations or sales during fiscal
     1996. Accordingly a comparison of operations for years ended Sept. 30, 1995
     and 1996 would not be meaningful.

     However, the Company continued to incur general and administrative expenses
     in connection  with the audit of its financial  statements for fiscal 1995,
     processing the proxy materials and conducting the shareholders  meeting for
     approval  of  the  Gish  transaction,   concluding  the  Gish  transaction,
     management  of  its  real  estate,  accounting,  corporate  governance  and
     compliance  matters  and the  investigation  and  evaluation  of  corporate
     opportunities.

     All of the general and administrative expenses, $217,500, have been charged
     to  discontinued  operations  and  represent the amount shown as "Loss from
     discontinued  operations."  General  and  administrative  expenses  for the
     discontinued operations for fiscal 1995 were $966,114.

     The loss on the discontinued operations for the fiscal year ended September
     30, 1996, was $217,500 compared to a loss of $1,518,875 for the fiscal year
     ended September 30, 1995.

     Rental  operations of the real estate are segregated from the  discontinued
     operations and shown as operations of assets held for sale. Although a loss
     of $31,319 is  reported  for the fiscal  year  ended  September  30,  1996,
     current rental income on the real estate is  approximately  cash flow break
     even.

     Liquidity and Capital Resources
     -------------------------------

     Cash on hand and in money  market  investments  at  September  30, 1996 was
     $5,912 as compared to $3,025 at September 30, 1995.

     In order to maximize its value,  the Company is actively  pursuing  several
     opportunities  for merger with or  acquisition  of a  profitable  operating
     company with sound management and a record of successful performance.

     Because the Gish stock received at the closing of the Gish  transaction was
     unregistered,  the Company  secured a bank  credit  line to pay  delinquent
     accounts payable from the discontinued  operations and fund the general and
     administrative expenses pending the

                                        4

<PAGE>



     registration of those  securities.  The  registration  of those  securities
     became  effective  November  22,  1996.  The  Company  expects to margin or
     liquidate  Gish stock to pay the bank  credit  line and meet any  immediate
     cash flow needs  pending sale of the real estate and  determination  of the
     future business of the Company.

     The Company's stock is traded on the Electronic OTC Bulletin Board.
    
     As of December  31,  1996,  the Gish stock had a high bid of 7 1/8 and high
     asked of 7 5/8 with  thirty day  average  trading  volume of  approximately
     10,000  shares  per  day.  Management  believes  that  the  Gish  stock  is
     sufficiently  liquid to enable  the  Company  to pay the bank  credit  line
     balance of approximately  $315,000,  provide for any operating  expenses in
     excess of rental income pending  determination  of the future  direction of
     the Company and fund the costs of a merger or acquisition transaction.



                                       5

<PAGE>



                       CREATIVE MEDICAL DEVELOPMENT, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                 For the Years Ended September 30, 1996 and 1995


                                TABLE OF CONTENTS
                                -----------------

                                                                  Page
                                                                  ----

Independent Auditor's Report                                       F-1

Consolidated Balance Sheet                                         F-2

Consolidated Statement of Operations                               F-3

Consolidated Statement of Shareholders' Equity (Deficit)           F-4

Consolidated Statement of Cash Flows                               F-5

Notes to Consolidated Financial Statements                       F-6-13




<PAGE>

                          INDEPENDENT AUDITOR'S REPORT



The Shareholders and
   Board of Directors
Creative Medical Development, Inc.


     We have audited the  accompanying  consolidated  balance  sheet of Creative
Medical  Development,  Inc. as of September  30, 1996 and 1995,  and the related
consolidated  statements of operations,  shareholders' equity (deficit) and cash
flows for the years then ended. These consolidated  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  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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. at September 30, 1996 and 1995, and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.

     As discussed in Note 10 to the financial statements, on September 13, 1995,
the Company entered into an agreement to sell substantially all of its operating
assets and technology.









November 27, 1996
                                      F-1

<PAGE>
                       CREATIVE MEDICAL DEVELOPMENT, INC.

                           CONSOLIDATED BALANCE SHEET

                           September 30, 1996 and 1995


                                                      1996             1995
                                                    ----------      ----------
                        ASSETS 

Current assets:
     Cash                                           $    5,912      $    3,025
     Accounts receivable                                 9,422         241,991
     Investment securities (Notes 2 and 5)           1,771,771
     Net assets of discontinued operations (Note 10)                   680,957
     Assets held for sale (Note 3)                   1,194,133       1,235,965
                                                     ---------       ---------
                      
              Total assets                          $2,981,238      $2,161,938
                                                    ==========      ==========

                    LIABILITIES AND
                  SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
     Notes payable due within one year (Note 5)     $  329,362      $  710,237
     Accounts payable                                   43,013         241,012
     Accrued liabilities (Note 4)                        5,037          55,182
                                                    ----------      ----------
              Total current liabilities                377,412       1,006,431
                                                    ----------      ----------

Notes payable due after one year (Note 5)            1,224,873       1,237,738
                                                    ----------      ----------

              Total liabilities                      1,602,285       2,244,169
                                                    ----------      ----------

Commitments and contingencies (Notes 7 and 8)

Shareholders' equity (deficit) (Note 6):
     Convertible Preferred Stock; $.01 par value;
         5,000,000 shares authorized; shares
         outstanding: 810,000 in 1996 and 1995          8,100            8,100
     Common stock; $.01 par value; 10,000,000 shares
         authorized; shares outstanding:  2,084,745 
         and 2,012,480 in 1996 and 1995, respectively   20,847           20,125
     Additional paid-in capital                      4,837,533        4,802,123
     Unrealized loss on available-for sale investment
         securities, net of taxes (Note 2)            (228,229)
     Accumulated deficit                            (3,259,298)      (4,912,579)

              Total shareholders' equity (deficit)   1,378,953          (82,231)
                                                    ----------       ----------

                                                    $2,981,238       $2,161,938
                                                    ==========       ==========

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

                                       F-2

<PAGE>
                       CREATIVE MEDICAL DEVELOPMENT, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS

                 For the Years Ended September 30, 1996 and 1995


                                                       1996            1995
                                                    ----------      -----------

Assets held for sale:
     (Loss) gain from operations of assets
        held for sale                               $   (31,319)    $    29,871

Discontinued operations (Note 10):
     Loss from discontinued operations                 (217,500)     (1,518,875)

     Gain on disposal of discontinued o
         operations,net of tax                        1,902,100
                                                    -----------     -----------

Net gain (loss)                                     $ 1,653,281     $(1,489,004)
                                                    ===========     ===========

Net gain (loss) per share                           $       .81     $      (.76)
                                                    ===========     ===========

Shares used in per share computations                 2,052,629       1,958,624
                                                    ===========     ===========

























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


                                       F-3

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

                                      CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)

                                           For the Years Ended September 30, 1996 and 1995

                                                                                                           Unrealized
                                                                                                              Loss
                                                                                                           on Available-   Total
                                        Preferred Stock        Common Stock       Additional                 for-Sale  Shareholders'
                                       -----------------   --------------------    Paid-in     Accumulated  Investment     Equity
                                       Shares     Amount    Shares      Amount     Capital       Deficit    Securities   (Deficit)
                                       ------     ------   ---------   --------  -----------   ----------  -----------   ---------

<S>                                   <C>         <C>      <C>          <C>      <C>           <C>                       <C>       
Balances, September 30, 1994          750,000     $7,500   1,918,880    19,189   $4,707,259    $ (3,423,575)             $1,310,373

 Issuance of common stock
    for services (Notes 6 and 7)                              17,600       176       31,124                                  31,300
 Issuance of common stock
    (Notes 6 and 7)                                           76,000       760       56,240                                  57,000
 Issuance of preferred stock
    (Notes 6 and 7)                     60,000       600                                                                        600
 Issuance of warrants for services
    (Note 6)                                                                          7,500                                   7,500
 Net loss                                                                                        (1,489,004)             (1,489,004)
                                      --------   -------    ---------   ------    ---------      ----------  ----------  ----------

Balances, September 30, 1995           810,000     8,100    2,012,480   20,125    4,802,123      (4,912,579)                (82,231)
                                      --------   -------    ---------   ------    ---------      ----------  ----------  ----------

 Issuance of common stock for
     services (Notes 6 and 7)                                  72,265      722       35,410                                  36,132
 Unrealized loss on available-for-sale
     investment securities, net of taxes                                                                      $(228,229)   (228,229)
 Net income                                                                                       1,653,281               1,653,281
                                      --------    -------   ---------   -------   ---------      ----------   ----------  ----------

Balances, September 30, 1996           810,000    $ 8,100   2,084,745   $20,847  $4,837,533     $(3,259,298)  $(228,229) $1,378,953
                                      ========    =======   =========   =======  ==========     ===========   =========  ==========





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

                                                                  F-4
</TABLE>

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

                                       CONSOLIDATED STATEMENT OF CASH FLOWS

                                  For the Years Ended September 30, 1996 and 1995


                                                                         1996                    1995
                                                                      -----------             -----------
<S>                                                                   <C>                      <C>    
Cash flows from operating activities:
     Net gain (loss)                                                  $ 1,653,281             $(1,489,004)
     Reconciliation  to net cash used
     for operating activities:
         Gain on disposal of discontinued operations                   (1,902,100)
         Depreciation and amortization                                     41,832                 166,763
         Issuance of common and convertible preferred
              stock for services and                                       36,132                  31,900
         Issuance of warrants for services                                                          7,500
         Changes in assets and liabilities:
              Accounts receivable                                         232,569                (138,746)
              Inventories                                                                         (41,743)
              Accounts payable                                           (197,999)                 85,509
              Accrued liabilities                                         (50,145)                 20,717
                                                                      -----------             -----------

Net cash used for operating activities                                   (186,430)             (1,357,104)

Cash flows from investing activities:
     Acquisition of property and equipment                                                       (147,033)
     Proceeds from sale of discontinued operations                        583,057

     Net cash  provided by (used for)
         investing activities                                             583,057                (147,033)
                                                                      -----------             -----------
Cash flows from financing activities:
     Issuance of common stock                                                                      57,000
     Issuance of notes payable                                            316,498                 853,300
     Repayment of notes payable                                          (710,238)               (276,057)

     Net cash (used for) provided by financing activities                (393,740)                634,243

Increase (decrease) in cash                                                 2,887                (869,894)

Cash:
     Beginning of period                                                    3,025                 872,919

     End of period                                                    $     5,912             $     3,025
                                                                      ===========             ===========

Supplemental disclosure of cash flow information:
     Interest paid                                                    $   159,029             $   160,290
                                                                      ===========             ===========

     Noncash changes:
         Investment securities acquired in connection
              with sale of discontinued operations                    $ 2,000,000
         Inventory                                                                            $   223,714
         Other assets                                                                         $    28,280
         Property and equipment, net                                                          $ 1,684,658
         Net assets of discontinued operations                                                $  (680,957)
         Net assets held for sale                                                             $(1,235,965)
         Unrealized loss on available-for sale investments
              securities, net of taxes                                $  (228,229)            $(1,235,965)

                     The accompanying notes are an integral
                      part of these financial statements 

                                       F-5
</TABLE>

<PAGE>

                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  SIGNIFICANT ACCOUNTING POLICIES

     Business
     --------

     Creative Medical Development,  Inc. (the "Company"),  designed,  developed,
     manufactured and marketed proprietary  ambulatory infusion therapy products
     for alternate site patient care. 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  discontinued  its operations on September 13,
     1995 (Note 11).

     Principles of Consolidation
     ---------------------------

     The consolidated  financial  statements include the accounts of the Company
     and its majority-owned subsidiary, LBI. The Company acquired a 99% interest
     in LBI, a California  partnership ("LBI") in 1993. LBI was organized to own
     and operate the building in which the Company's  offices and  manufacturing
     facilities were located.

     Net Income (Loss) Per Share
     ---------------------------

     Net income  (loss) per share has been computed  using the weighted  average
     number  of  common  shares  outstanding  during  the  period.   Outstanding
     convertible  preferred  stock,  warrants  and stock  options  have not been
     included in the calculation as they would have an antidilutive effect.

     Income Taxes
     ------------

     The Company has generated net operating loss carryforwards of approximately
     $3,165,000 and $1,557,000  which are available to offset future Federal and
     State   income  tax   expense,   respectively.   Federal   and  State  loss
     carryforwards  expire through 2011.  The tax benefit of loss  carryforwards
     has been offset by a valuation allowance of the same amount.

     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.



                                       F-6

<PAGE>
                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

2.   INVESTMENTS

     The Company  received  240,240  shares of Gish  Biomedical  common stock in
     conjunction  with  the sale of  assets  discussed  in Note  10.  Management
     classified  the stock as available-  for-sale upon receipt.  The securities
     were adjusted to fair value, as required under SFAS 115, and net unrealized
     losses of $228,229 were recorded as a separate  component of  stockholders'
     equity.
<TABLE>
<CAPTION>


                                                                       1996
                                    -----------------------------------------------------------------------
                                                        Gross                Gross              Estimated
                                      Amortized       Unrealized           Unrealized             Market
                                        Cost            Gains                Losses               Value
                                    ------------      ----------           ----------           -----------

         Available-for-Sale:
         -------------------

         <S>                        <C>                <C>                  <C>                <C>   
         Gish Biomedical
              common stock          $  2,000,000       $   -                $ 228,229          $ 1,771,771
                                    ============       =========            =========          ===========
</TABLE>

3.  NET ASSETS HELD FOR SALE

     The land, building,  leasehold improvements and other assets of the Company
     are  classified as net assets held for sale  consistent  with  management's
     intent.  These assets were  transferred  at their  aggregate net book value
     which  management  believes  is less than  market  value.  The  Company has
     continued to provide for depreciation  using the straight-line  method over
     the estimated useful lives which range from 2 to 40 years.

     Net assets held for sale at September 30, 1996 and 1995 are as follows:

                                         1996                 1995
                                      -----------          -----------

         Land                         $   275,000          $   275,000
         Building, net                    881,262              932,685
         Other assets                      23,289               28,280
                                      ------------         -----------

                                      $ 1,179,551          $ 1,235,965
                                      ===========          ===========

4.   ACCRUED LIABILITIES

     Accrued liabilities at September 30, 1996 and 1995 are as follows:

                                            1996                 1995
                                         ----------            ---------

         Accrued payroll                                       $  46,007
         Other                           $    5,037                9,175
                                         ----------            ---------

                                         $    5,037            $  55,182
                                         ==========            =========



                                       F-7

<PAGE>


                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

5.   NOTES PAYABLE

     Notes payable at September 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>

                                                                   1996                1995
                                                                ----------          -----------

        <S>                                                      <C>                <C>                                     
         11.375% secured note payable; secured by a
              building; monthly installments of $12,750
              due through December 21, 1998                     $1,237,737          $1,249,225

         10.25% secured line of credit; secured by
              230,240 shares of Gish Biomedical common
              stock, due on or before February 1, 1997             289,722

         10%  secured note payable;  secured by substantially 
              all assets of the Company; due upon closing
              of the Asset Purchase Agreement (Note 10)                                600,000

         10% secured note payable; secured by 10,000
              shares of Gish Biomedical common stock                26,776

         10% unsecured notes payable; due July 1, 1996                                  92,500

         10.75% unsecured notes payable; due on or
              before August 5, 1996                                                      6,250
                                                                -----------         ----------

                                                                  1,554,235          1,947,975

         Less current portion                                      (329,362)          (710,237)
                                                                -----------         ----------

         Notes payable due after one year                        $1,224,873         $1,237,738
                                                                ===========         ==========
</TABLE>


         Notes payable mature as follows:

                Year Ending
               September 30,
               -------------

                   1997                                         $   329,362
                   1998                                              14,405
                   1999                                           1,210,468
                                                                -----------

                                                                $ 1,554,235
                                                                ===========



                                       F-8

<PAGE>
                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

6.   SHAREHOLDERS' EQUITY

     Issuance of Common Stock
     ------------------------

     In  December,  1994,  the  Company  issued  15,000  shares of common  stock
     pursuant to an  employment  agreement  with one of its  officers  (Note 7).
     Compensation  expense of $30,000  was  recognized  in  connection  with the
     issuance of common stock.

     In May,  1995,  the Company issued 76,000 shares of common stock to private
     parties resulting in net proceeds of $57,000.

     In 1996 and 1995,  the  Company  issued  72,265 and 2,600  shares of common
     stock  to  employees  pursuant  to  a  compensation   reduction  agreement.
     Compensation  expense of $36,132 and $1,300 was  recognized  in  connection
     with the issuance of common stock.

     Convertible Preferred Stock
     ---------------------------

     The Company's  Certificate of Incorporation  permits the Board of Directors
     to issue convertible  preferred stock with such conversion  rates,  rights,
     privileges and preferences as the Board may determine.

     In December, 1994, the Company issued 60,000 shares of $.01 par convertible
     preferred  stock  pursuant  to an  employment  agreement  with  one  of its
     officers (Note 7).  Management has determined  that the market value of the
     convertible preferred stock approximated the par value of those shares. The
     preferred  stock is convertible  into an equal number of common shares upon
     the completion of certain revenue objectives set for the Company.

     Warrants
     --------

     Between February 28, 1995 and May 2, 1995, the Company executed $200,000 of
     short-term notes payable.  As additional  consideration  for the loans, the
     Company issued warrants for the purchase of 100,000 shares of Common stock.
     The warrants  are  exercisable  until March 1, 1998 at $.35 per share.  The
     market value was estimated at or below the strike price and  accordingly no
     interest expense or additional paid in capital was recorded.

     In May,  1995,  warrants for the purchase of 20,000  shares of Common stock
     were issued for services rendered.  10,000 shares were exercisable at $1.50
     per share and 10,000 were  exercisable  at $.75 per share.  The  difference
     between the exercise price and the stock's fair market value,  $7,500,  was
     recognized as an operating  expense for the year ended  September 30, 1995.
     Additional  paid-in-capital  was  increased  by a  corresponding  amount to
     reflect the issuance of the warrants. The warrants expire on May 31, 1998.

     In June  1995,  as  consideration  for  restructuring  a loan  in  default,
     warrants for the purchase of 46,250 shares of common stock were issued with
     an  exercise  price of $.35 per  share.  Market  value  of the  shares  was
     estimated to be at or below the exercise price and  accordingly no interest
     expense or additional paid in capital was recorded.


                                       F-9

<PAGE>
                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

7.  COMMITMENTS

     Obligations to Selling Agent
     ----------------------------

     In exchange for investment  banking  services,  the Company entered into an
     exclusive  five-year  agreement,  ending June 1998,  with a selling  agent.
     Under the  agreement,  the Selling Agent is entitled to a consulting fee of
     $2,000 per month.  The selling agent is entitled to a fee ranging from 2 to
     10 percent of the funds  received  by the  Company  pursuant  to  borrowing
     agreements,  joint ventures,  mergers,  sales or acquisitions  with parties
     introduced  by the  Selling  Agent.  The  selling  agent  also  received  a
     five-year  option to purchase 10 percent of the  outstanding  common stock,
     warrants and options of the Company at a purchase price equal to 10 percent
     of the net book value of the Company as of May 31,  1993.  The Company also
     agreed  to  provide  the  selling  agent  with  one  seat on the  Board  of
     Directors.

     In September  1995,  the Selling  Agent agreed to terminate  his rights and
     obligation under the agreement.

     Compensation Agreements
     -----------------------

     The Company has entered  into a  five-year  employment  agreement  with the
     President of the Company.  The agreement  expires in July 1997. In addition
     to annual  compensation,  the agreement  provides for additional  incentive
     compensation equal to one percent of net revenues.

     Effective October 1, 1994, the Company entered into an employment agreement
     with one of its  officers,  which  extends  through  September 30, 1996. In
     addition to annual  compensation,  this agreement provided for the issuance
     of 15,000 shares of common stock and 60,000 shares of convertible preferred
     stock (Note 6).

8.   CONTINGENCIES

     A claim has been asserted against the Company for $250,000 as a penalty for
     not proceeding  with a sale of assets  pursuant to a letter of intent dated
     August, 1995. The Company believes it is entitled to damages from the other
     party in an as yet undetermined  amount.  Management  intends to vigorously
     contest  this  claim.  The  outcome  of this  matter  cannot be  reasonably
     determined at this time.




                                      F-10

<PAGE>
                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

8.   CONTINGENCIES (Continued)

     As discussed in Note 10, from  September  13, 1995 through  April 17, 1996,
     the  Company's  manufacturing  operations  were operated for the benefit of
     Gish Biomedical,  Inc. (Gish).  In connection with this  arrangement,  Gish
     forwarded  operating  advances  totaling $375,193 to the Company which were
     secured  by 10,000  shares of Gish  stock due to the  Company  on April 17,
     1996.  The Company has offset  losses  incurred  during the period that its
     operations  were for the  benefit of Gish  totaling  $348,417  against  the
     advances resulting in owing a net amount of $26,776.  Gish has disputed the
     Company's  loss  calculation  and  maintains  the Company is obligated  for
     amounts in excess of $84,000.  Management  believes  that it has  correctly
     calculated the amounts due to Gish and intends to vigorously contest Gish's
     dispute. The outcome of this matter cannot be reasonably determined at this
     time.

9.   INCOME TAXES

     Deferred income taxes reflect the effect of temporary  differences  between
     the tax basis of assets and liabilities  and the reported  amounts of those
     assets and liabilities for financial  reporting  purposes.  Deferred income
     taxes also  reflect  the value of net  operating  losses and an  offsetting
     valuation   allowance.   The  Company's   total  deferred  tax  assets  and
     corresponding valuation allowance at September 30, 1996 and 1995, consisted
     of the following:

                                                    1996              1995 
                                                 ----------       -----------

         Tax effects of carryforward benefits    $  644,000       $ 1,304,000

         Less:  valuation allowance                (644,000)       (1,304,000)
                                                 ----------       ----------

         Net deferred tax asset                  $        -       $        -
                                                 ==========       ===========

         The  provision for income taxes is different  than the amount  computed
         using the applicable statutory federal income tax rate as follows:

                                                      1996            1995
                                                   ---------        -----------

         Tax expense(benefit) at statutory rates   $ 533,904        $ (580,711)

         Increase(decrease) in valuation allowance  (533,904)          580,711
                                                   ---------       -----------

                                                   $       -       $         -
                                                   =========       ===========

                                      F-11

<PAGE>
                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

9.   INCOME TAXES (Continued)

     The Company has available net operating  loss  carryforwards  of $3,449,000
     and $1,699,000 to offset Federal and State income taxes, respectively.  The
     carryforwards expire primarily in 2009 thru 2011.

     SFAS No. 109 requires  that a valuation  allowance be recorded  against tax
     assets which are not likely to be  realized.  Specifically,  the  Company's
     carryforwards  expire at specific  future dates and  utilization of certain
     carryforwards is limited to specific amounts each year. However, due to the
     uncertain nature of their ultimate realization based upon past performance,
     the  Company has  established  a full  valuation  allowance  against  these
     carryforward  benefits and will recognize the benefits only as reassessment
     demonstrates  they are realizable.  Realization is entirely  dependent upon
     future  earnings in  specific  tax  jurisdictions.  While the need for this
     valuation  allowance  is subject to periodic  review,  if the  allowance is
     reduced,  the tax benefits of the carryforwards  will be recorded in future
     operations as a reduction of the Company's income tax expense.

10.  DISCONTINUED OPERATIONS

     On September  13,  1995,  the Company  entered into an agreement  with Gish
     Biomedical,  Inc. (Gish) to sell  substantially all of its operating assets
     and  technology for $600,000 in cash and shares of Gish common stock valued
     at $2,000,000.  Upon closing,  April 17, 1996,  the Company  entered into a
     one-year  lease with Gish for the portion of the building which the Company
     used in its manufacturing operations.

     Net assets of  discontinued  operations at September 30, 1995  consisted of
     the following:

                  Inventory                                  $  221,270
                  Manufacturing equipment, net of
                    accumulated depreciation of $195,060        390,193
                  Office furniture, net of accumulated
                    depreciation of $44,059                      52,985
                  Other assets                                   16,509
                                                             ----------

                                                             $  680,957
                                                             ==========



                                      F-12

<PAGE>
                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

10.  DISCONTINUED OPERATIONS (Continued)

     Summary results of operations of discontinued operations for the year ended
     September 30, 1996 and 1995 are as follows:

                                            1996                    1995
                                         -----------            -----------

         Sales                                                   $  806,637
                                         -----------             ----------

         Cost of sales                                              453,702
         Research and development                                   413,559
         Selling expenses                                           492,137
         General and administrative
                  expenses               $   217,500                966,114
                                         -----------             ----------

                                             217,500              2,325,512
                                         -----------             ----------

         Loss from discontinued
                  operations             $   217,500             $1,518,875
                                         ===========             ==========


     Under terms of the  agreement,  from September 13, 1995 through the closing
     date, the Company's manufacturing  operations were operated for the benefit
     of Gish.

     At  September  30, 1995,  the Company  owed Gish  $600,000 in the form of a
     secured note (Note 5). In accordance  with the terms of the agreement,  the
     Company retired $250,000 of notes payable,  $150,000 of delinquent  payroll
     tax  deposits,  and paid  current  payroll  and  vendor  payables  with the
     proceeds of the $600,000  note.  The notes retired  matured on September 1,
     1995.

     Cash, accounts  receivable,  the building housing the Company's  operations
     and land with a net book value of  $1,912,885  were excluded from the sale.
     The agreement  does not provide for the  assumption of any of the Company's
     liabilities by Gish.

11.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company  adopted  SFAS 107,  Disclosures  About Fair Value of Financial
     Instruments,  October 1, 1995. SFAS 107 requires that the Company  disclose
     estimated fair values for financial instruments for which it is practicable
     to estimate fair value.  These  estimates  are made at a specific  point in
     time based on relevant  market  data and  information  about the  financial
     instruments.  These  estimates do not reflect any premium or discount  that
     could  result from  offering  the Company  entire  holdings of a particular
     financial  instrument for sale at one time, nor do they attempt to estimate
     the value of anticipated future business related to the instruments.





                                      F-13

<PAGE>
                       CREATIVE MEDICAL DEVELOPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

11.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

     Because  no  market  exists  for a  significant  portion  of the  Company's
     financial  instruments,   fair  value  estimates  are  based  on  judgments
     regarding  current economic  conditions,  risk  characteristics  of various
     financial instruments and of the factors. These estimates are subjective in
     nature and involve  uncertainties  and matters of significant  judgment and
     therefore cannot be determined with precision. Changes in assumptions could
     significantly affect the fair values presented.

     The following  methods and assumptions were used by the Company to estimate
     the fair value of its financial instruments at September 30, 1996:

     Cash: For cash, the carrying amount is estimated to be fair value.

     Investment securities: For investment securities,  fair values are based on
     quoted market prices, where available.

     Notes payable:  For notes payable,  fair values are estimated  based on the
     discounted present values of the note balance using current interest rates.

     The estimated  fair values of the Company's  financial  instruments  are as
     follows:


                                                   September 30, 1996
                                               ---------------------------
                                                 Carrying          Fair
                                                  Amount           Value
                                               ----------       ----------

         Financial assets:
           Cash                                $    5,912       $    5,912
           Investment securities                1,771,771        1,771,771
                                               ----------       ----------

                                               $1,777,683       $1,777,683
                                               ==========       ==========

         Financial liabilities:
           Notes payable                       $1,554,235       $1,554,235
                                               ==========       ==========



                                      F-14


<PAGE>

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

     There  have  been  no  changes  in  or  disagreements  with  the  Company's
     accountants requiring disclosure under Item 304 of Regulation S-B.


                                    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

Mark A. Davies                     51                  Chairman of the Board

Ron Gangemi                        54                  CEO and Director

John E. Hart                       57                  Secretary and Treasurer

Eric P. Neibart                    42                  Director


     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:

     Mark A.  Davies  has been a  director  of the  Company  since June 1993 and
Chairman of the Board of Directors  since  January  1994.  From June 1984 to May
1988,  Mr.  Davies was  employed  by Codex  Corporation,  a division of Motorola
Corporation,  where he became a vice  president  and general  manager of product
development.  From June 1988 to  February  1995,  Mr.  Davies  was an  executive
officer of ShipNet Systems,  Inc., a Chicago,  Illinois based company engaged in
shipment  management  information  systems.  Since February 1995, Mr. Davies has
been a director in the Corporate  Strategy office of Motorola  Corporation.  Mr.
Davies holds B.S. and M.B.A. degrees from the University of Waterloo.

     Ronald J.  Gangemi has been the Chief  Executive  Officer and a director of
the  Company  since he  founded  it in July  1992.  From  1990 to  1991,  he was
President,  and  subsequently  from  1991  to  1992 he was  General  Manager  of
Manufacturing, of Fergy Corp., ("Fergy") a developer and manufacturer of medical
products. In February 1991 Fergy was acquired by Keller Medical, Inc. ("Keller")
and Mr. Gangemi became  General  Manager for one of Keller's  divisions in April
1991,  serving  until March 1992.  Mr.  Gangemi and Keller  subsequently  became


                                        6

<PAGE>

involved in litigation with each other. See "Business-Litigation".  From 1985 to
1990, he was Vice President-Research and Development for Healthtek, Inc.

     John E. Hart has been general counsel to the Company since October 1993 and
has been its Secretary and Treasurer  since June 1994.  From 1985 to 1994 he was
engaged in the private  practice of law.  Mr. Hart holds a J.D.  degree from the
University  of Southern  California  and a B.A.  degree from the  University  of
Redlands.

     Eric B. Neibart,  M.D.,  has been a director of the Company since  November
1993 and has been engaged in the private  practice of medicine,  specializing in
infectious  disease and internal  medicine,  since 1985.  He graduated  from New
Jersey Medical School.

     Mr. Hart and Mr.  Gangemi each failed to file one Form 4 to report  receipt
of 12,139 and 14,843,  respectively,  shares of Common Stock on May 31, 1996, in
lieu of  deferred  salary.  Both Mr.  Hart and Mr.  Gangemi  failed  to file the
appropriate Form 4s as a result of inadvertence.  They each filed timely Form 5s
reporting the transactions.

Item 10  Executive Compensation
         -----------------------

     The  following  table sets  forth  remuneration  paid to certain  executive
officers for the fiscal years ended  September  30, 1995 and September 30, 1996,
respectively:
<TABLE>
<CAPTION>

                                                                                        Long-Term Compensation
                                                                           -----------------------------------------
                                          Annual Compensation                          Awards             Payouts
                                       -----------------------------------------------------------------------------
                                                                   Other     Restricted    Securities       LTIP     All Other
   Name and Principal                                             Annual       Stock       Underlying     Payouts      Comp.
        Position              Year      Salary ($)    Bonus        Comp.     Awards ($)      Options
                                                       ($)          ($)                        (#)          ($)         ($)
--------------------------------------------------------------------------------------------------------------------

<S>                           <C>         <C>           <C>          <C>         <C>            <C>          <C>         <C>
Ronald J. Gangemi,            1995        102,469       0            0           0              0            0           0
C.E.O.                        1996         85,273       0            0           0              0            0           0


John E. Hart,                 1995        89,428        0            0           0              0            0           0
Secretary/Treasurer           1996        71,844        0            0           0              0            0           0

</TABLE>


     Mr.  Gangemi's  five-year  employment  agreement  effective  July  1,  1992
provides  for an annual  salary of  $110,000  and a bonus equal to 1% of the net
sales of the Company  through  June 30, 1997.  Mr.  Hart's  two-year  employment
agreement  effective  October 1, 1994  providing for an annual salary of $96,000
expired  and he has  been  providing  services  on a  consulting  basis.  Salary
accruing  during  the period  September  13,  1995  through  April 17,  1996 was
reimbursed  to the Company by Gish.  From April 17, 1996 through  September  30,
1996 salary was paid directly by Gish.  Mr.  Gangemi has submitted a billing for
$7,000 for  services he  rendered  to CMD during the period May 1, 1996  through
November 25, 1996. Mr. Hart is being paid a total of $17,500 for his services to
the Company  from May 1, 1996  through  December  31, 1996 and he will be a full
time  employee for the period  January 1, 1997 through  March 31, 1997 under the
same terms as his employment contract.


     The  Company's  nonsalaried  directors  receive $500 for each Board meeting
attended together with  reimbursement  for  out-of-pocket  expenses in attending
Board meetings.


                                        7

<PAGE>



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.

   Name and Address of                Number of
 Beneficial Owner(1)(3)             Shares Owned             Percent of Class
 ----------------------             ------------             ----------------

 Mark A. Davies (3)                     25,000                      1.2%
 870 Gold Flat Road
 Nevada City, CA 95959

 Ronald J. Gangemi (2)                 447,788                     21.5%
 870 Gold Flat Road
 Nevada City, CA 95959

 Eric P. Neibart (3)                    22,500                      1.1%
 870 Gold Flat Road
 Nevada City, CA 95959

 All officers and directors            507,427                     24.3%
 as a group (4 persons)


----------
(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 Class A Preferred Stock.

(2) Includes shares owned by Mr. Gangemi's spouse and children. Does not include
810,000  shares of Class A  Preferred  Stock held by Mr.  Gangemi and his spouse
convertible  into an equal number of shares of Common Stock  contingent upon the
Company achieving certain levels of gross revenues or net income.


                                        8

<PAGE>


(3)  Includes  options  held by Messrs.  Davies and Neibart to  purchase  17,500
shares each under the Company's Incentive Stock Option Plan.

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 June,  1995,  as  consideration  for  restructuring  a  $92,500  loan in
default,  warrants,  exercisable until March 1, 1998, for the purchase of 46,250
shares of common stock were issued with an exercise price of $.35.

     On December 10, 1994, Mr. Hart entered into a two-year  employment contract
with the Company  effective  October 1, 1994,  providing for an annual salary of
$96,000  and  issuance  of 15,000  shares of Common  stock and 60,000  shares of
Series A Preferred stock. One half of the Series A Preferred stock is subject to
forfeiture  in  the  event  Mr.  Hart  does  not  meet  his  agreed  performance
objectives.

                                       
                                       9


<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
         September 30, 1996.


                                       10

<PAGE>

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)

   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)

   10.04    Employment Agreement (Mr. Hart) (2)

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

   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

<PAGE>
   
 Exhibit #    Description
 ---------    -----------

   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

(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.

(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.

                                       12

<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/  RON GANGEMI
                                            ------------------------------------
                                                (Signature and Title)
                                            Ron Gangemi, CEO & Director

                                         Date:  January 13, 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/  JOHN E. HART
                                            ------------------------------------
                                                (Signature and Title)
                                             John E. Hart, Treasurer & Secretary

                                         Date:  January 13, 1997
                                               ---------------------------------


                                         By:  /S/  MARK A. DAVIES
                                             -----------------------------------
                                                  (Signature and Title)
                                             Mark A. Davies, Director

                                         Date:  January 13, 1997
                                               ---------------------------------
                                      -13-