UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities
=== Exchange Act of 1934
For the quarterly period ended March 31, 1996
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Transition report under Section 13 or 15(d) of the Securities
=== Exchange Act of 1934
For the transition period from _____________ to ______________
Commission File Number: 0-12627
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MEDICAL DISCOVERIES, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Utah 87-0407858
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2040 East Murray-Holladay Road, Suite 116, Salt Lake City, UT 84117
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(Address of principal executive offices)
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(801) 273-7388
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(Issuer's Telephone Number)
N/A
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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. X Yes No
=== ===
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports
required to be filed by Sections 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 ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 20,329,558
-----------
as of March 29, 1996.
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Transitional Small Business Disclosure Format (check one)
Yes X No
=== ===
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are filed with this report:
Balance Sheets as of March 31, 1996 (unaudited) and March 31, 1995
(unaudited)
Statements of Operations for the Three-Month Periods ended
March 31, 1996 (unaudited) and March 31, 1995 (unaudited)
and since inception through March 31, 1996 (unaudited)
Statements of Cash Flows for the Three-Month Periods ended
March 31, 1996 (unaudited) and March 31, 1995 (unaudited)
Notes to Unaudited Financial Statements
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<TABLE> MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF MARCH 31, 1996 AND MARCH 31, 1995
(UNAUDITED)
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 329,742 $ 60,181
Accounts Receivable 43,604 0
--------- --------
Total Current Assets 373,346 60,181
PROPERTY AND EQUIPMENT
Equipment 54,262 39,092
Less: Accumulated Depreciation (6,023) (15,160)
--------- ----------
Net Property and Equipment 48,239 23,932
OTHER ASSETS
Deposits 1,170 0
Note receivable 66,083 0
Deferred Federal R&D Tax Credits 0 118,561
License Agreement and
Marketing Rights 0 10,000
--------- ---------
Total Other Assets 67,253 128,561
Total Assets $ 488,838 $ 212,674
========= =========
</TABLE>
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<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 531,113 $ 80,231
Medical care deposits 0 0
Accrued interest 16,373 0
Current maturities of
notes payable 2,520 0
----------- -----------
Total Current Liabilities 550,006 80,231
LONG TERM LIABILITIES
Notes payable 320,590 0
----------- -----------
Total Long Term Liabilities 320,590 0
----------- -----------
TOTAL LIABILITIES 870,596 80,231
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, no par value,
authorized 100,000,000 5,638,085 3,414,372
shares; issued and
outstanding
March 31, 1996
20,329,558
Retained Deficit (5,907,343) (3,281,929)
Subscription receivables (112,500) 0
----------- -----------
Total Stockholders' Equity (381,758) 132,443
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 488,838 $ 212,674
=========== ===========
</TABLE>
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<TABLE> MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(UNAUDITED)
Cumulative
For the three months Amounts since
ended March 31, November 20,
--------------------- 1991 (date of
1996 1995 inception)
---------- -------- -----------
<S> <C> <C> <C>
REVENUE
Clinical Fees $ - $ $ 108,200
---------- ---------- -----------
Total Revenue 0 0
EXPENSES
License 1,000,000
Research and Development 60,730 24,206 2,164,289
General and Administrative 173,729 73,995 2,648,152
Depreciation 2,790 1,88 7,790
---------- ---------- ------------
Total Expenses 237,249 100,083 5,820,231
---------- ---------- ------------
NET LOSS FROM OPERATION (237,249) (100,083) (5,712,031)
OTHER INCOME / (EXPENSE) (5,781) 0 (31,270)
---------- ---------- ------------
LOSS BEFORE INCOME TAXES (243,030) (100,083) (5,743,301)
AND EXTRAORDINARY ITEM
INCOME TAXES - - 0
---------- ---------- ------------
LOSS BEFORE EXTRAORDINARY (243,030) (100,083) (5,743,301)
ITEM
FORGIVENESS OF DEBT 673,486 - 1,235,536
---------- ---------- ------------
NET INCOME $ 430,456 $(100,083) $(4,507,765)
========== ========== ============
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<S> <C> <C> <C>
INCOME / (LOSS) PER SHARE
Loss from continuing
operation $ (0.01) $ (0.01) (0.37)
Gain from debt
forgiveness 0.03 - 0.08
----------- ----------- ------------
Income / (loss) per
share $ 0.02 $ (0.01) $ (0.29)
=========== ============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES 20,388,823 17,169,812 15,544,379
=========== ============ ============
</TABLE>
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MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(UNAUDITED)
Cumulative
For the three months Amounts since
ended March 31, November 20,
-------------------- 1991 (date of
1996 1995 inception)
---------- ---------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) for the
period $ 430,456 $ (100,083) $ (4,507,765)
Add non-cash items
Depreciation 2,790 1,882 7,483
Common stock issued for
services and license 40,000 3,056,561
Loss on disposal of equipment 6,330
Gain on Debt Restructuring (673,486) (1,235,536)
---------- ---------- -------------
Net Cash from Operations (200,240) (98,201) (2,672,927)
WORKING CAPITAL CHANGES
Decrease (increase) in Accounts
Receivable 10,275 76,749
Decrease (increase) in
Prepaid Expenses 65,860 0
Decrease (increase) in Other Assets (1,170)
Increase (decrease) in: 0
Advances to shareholders' 0
Accounts payable (5,521) (51,458) 285,606
Accrued Expenses 23,326 51,903
---------- ---------- ------------
Net Cash from Working
Capital Changes 93,940 (51,458) 413,088
</TABLE>
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<S> <C> <C> <C>
INVESTING ACTIVITIES
Purchases of Equipment $ (1,791) $ (53,891)
---------- ----------- ------------
Net Cash from Investing
Activities (1,791) 0 (53,891)
FINANCING ACTIVITIES
Payment of notes payable (802)
Increase in notes payable 301,700
Equity contributed 131,374
Proceeds from issuance of
common stock 400,000 193,800 2,211,200
---------- ---------- ------------
Net Cash from Financing
Activities 400,000 193,800 2,643,472
---------- ------------ ------------
NET INCREASE / (DECREASE) IN CASH 291,909 44,141 329,742
CASH, BEGINNING PERIOD 37,833 16,040 0
CASH ENDING PERIOD $ 329,742 $ 60,181 $ 329,742
========== ============ ============
</TABLE>
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MEDICAL DISCOVERIES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTES TO UNAUDITED FINANCIAL STATEMENTS
The unaudited financial statements include the accounts of Medical
Discoveries, Inc. and include all adjustments which are, in the opinion
of management, necessary to present fairly the financial position as of
March 31, 1996 and the results of operations and changes in financial
position for the three-month period ended March 31, 1996. The results
of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the entire
year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
PATENTS AND PATENT APPLICATIONS. MDI has filed a patent
application with the U.S. Patent and Trademark Office ("U.S. PTO"),
covering the application of MDI-P to a variety of human diseases and
ailments, including acquired immune deficiency syndrome ("AIDS"). The
U.S. PTO has granted the Company a patent with respect to the
application of MDI-P to multiple sclerosis and cardiomyopathy. (Patent
No. 5,334,383 for "Electrically Hydrolyzed Salines as In Vivo
Microbicides or Treatment of Cardiomyopathy and Multiple Sclerosis").
The Company intends to pursue its current application to expand the
scope of its patent protection to include other diseases and ailments,
particularly HIV. The Company is also pursuing other United States and
foreign applications to provide patent protection for other uses of
MDI-P. MDI has also received an official Notice of Allowance of a
patent by the United States PTO for the electrolyzer required to
generate MDI-P. (Patent No. 5,507,932 for "Apparatus for Electrolyzing
Fluids").
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FUTURE RESEARCH EFFORTS. In regard to applications of MDI-P other
than the direct treatment of human diseases, MDI intends to actively pursue
the potential application of MDI-P as a sterilizing agent for
medical, dental, and veterinary fields in the U.S. and overseas. MDI intends,
as soon as the necessary studies are completed, to file a 510(k) pre-market
notification in this regard with the FDA. In regard to use of
MDI-P for human diseases, MDI intends to file an "investigational new
drug" application ("IND Application") with the FDA for use of MDI-P on
patients in the United States who are HIV-positive or who have AIDS.
The Company has filed a pre-IND submission in this regard. The Company
will also seek funding to commence clinical trials on such patients upon
approval of the IND Application. Beyond the initial focus on sterilization
and on HIV, and as funds will allow, the Company intends to conduct
research into the use of MDI-P with respect to multiple sclerosis and
cardiomyopathy and with respect to other human diseases and ailments.
Additionally, the Company intends to further investigate the ability of
MDI-P to kill certain highly resistant and pathogenic bacteria. Also,
MDI intends to continue cooperative research efforts with the two major
pharmaceutical/biotechnology companies mentioned above with respect to
blood-derived products and veterinary diseases. The results of the
current preliminary research in these areas will determine the course of
future research efforts.
ADDITIONAL FUNDING IS REQUIRED. Management intends to raise substantial
additional funds in private stock offerings in the near future in order to
meet its near-term funding requirements. In the future, management
anticipates the need to raise substantial additional funds in public
stock offerings as well. As additional funds are raised, the Company intends
to commence paying salaries to its officers. The Company also intends at
that time to hire additional technical and administrative personnel. The
bulk of any additional funding will likely be spent on continued research,
testing, and patent protection with respect to MDI-P.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the Company's 10-KSB filed April 13, 1996, the Company reported a
potential dispute involving Robert A. Spira, John J. Carella, and other
parties. On May 9, 1996, Mr. Carella accepted the Company's offer for
him to become a director of the Company, subject to certain conditions. The
Company anticipates formally appointing him to fill an existing
vacancy on the board of directors in the near future.
ITEM 2. CHANGES IN SECURITIES
N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5. OTHER INFORMATION
As described in the Company's 10-KSB filed April 13, 1996, the Company
raised $475,000 through a private placement. In connection with that
transaction, the Company has appointed David Walker as a director of the
Company. He has been general manager of Sunheaven Farms in Heaven Hills,
Washington (a twelve thousand acre agricultural operation) for twenty years.
Mr. Walker has a degree in economics from Brigham Young University.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-B.
The following are exhibits to this Form 10-QSB.
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
27 Financial Data Schedule.
(b) Reports on Form 8-K
N/A
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDICAL DISCOVERIES, INC.
Date: May 20, 1996 /s/ MARLIN TOOMBS
---------------------------
Vice President
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 329,742
<SECURITIES> 0
<RECEIVABLES> 109,687
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 373,346
<PP&E> 54,262
<DEPRECIATION> 6023
<TOTAL-ASSETS> 488,838
<CURRENT-LIABILITIES> 550,006
<BONDS> 0
0
0
<COMMON> 5,638,085
<OTHER-SE> (6,019,843)
<TOTAL-LIABILITY-AND-EQUITY> 488,838
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 237,249
<OTHER-EXPENSES> 5,781
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (243,030)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 673,486
<CHANGES> 0
<NET-INCOME> 430,000
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
<FN>
<F1>Amount is not separately provided in interim financial statements.
</FN>
</TABLE>
