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 June 30, 1997
----------------
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
-------
MEDICAL DISCOVERIES, INC.
- ------------------------------------------------------------------------
(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)
2985 North 935 East, Suite 9, Layton, UT 84041
- ------------------------------------------------------------------------
(Address of principal executive offices)
(801) 771-0523
- -----------------------------------------------------------------------
(Issuer's Telephone Number)
2040 East Murray-Holladay Road, Suite 116, Salt Lake City, UT 84117
- -----------------------------------------------------------------------
(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: 22,050,150
-----------
as of July 31, 1997
---------------
Transitional Small Business Disclosure Format (check one)
Yes X No
=== ===
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are filed with this report:
Balance Sheets as of June 30, 1997 (unaudited) and June 30, 1996
(unaudited)
Statements of Operations for the Three-Month Periods ended
June 30, 1997 (unaudited) and June 30, 1996 (unaudited)
and the Six-Month Periods ended June 30, 1997 (unaudited)
and June 30, 1996 and since inception through June 30, 1997
(unaudited).
Statements of Cash Flows for the Six-Month Periods ended
June 30, 1997 (unaudited) and June 30, 1996 (unaudited)
Notes to Unaudited Financial Statements
<PAGE>
MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
June 30, 1997 June 30, 1996
-------------- --------------
CURRENT ASSETS
Cash $ 20,515 $ 25,307
Accounts receivable 49,033 46,784
Prepaid expenses 2,692 10,780
--------- ----------
Total Current Assets 72,240 82,871
PROPERTY AND EQUIPMENT
Equipment 79,313 74,231
Less: Accumulated depreciation (23,809) (16,181)
--------- ----------
Net Property and Equipment 55,504 58,050
OTHER ASSETS
Deposits 2,260 1,170
Note receivable 5,493 30,586
--------- ----------
Total Other Assets 7,753 31,756
Total Assets $ 135,497 $ 172,677
=========== =============
CURRENT LIABILITIES
Accounts payable $ 731,552 $ 670,166
Accrued interest 9,973 26,039
Short term notes payable 51,000 0
Current maturities of
notes payable 2,924 2,795
----------- -----------
Total Current Liabilities 795,449 699,000
LONG TERM LIABILITIES
Notes payable 317,194 318,708
----------- -----------
Total Long Term Liabilities 317,194 318,708
----------- -----------
TOTAL LIABILITIES 1,112,643 1,017,708
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, no par value,
authorized 100,000,000 6,269,233 6,121,733
shares; 22,050,150 shares
issued and outstanding at
June 30, 1997
Retained deficit (7,073,879) (6,794,264)
Subscription receivables (172,500) 172,500
----------- -----------
Total Stockholders' Equity (977,146) (845,031)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 135,497 $ 172,677
=========== ============
<PAGE>
MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C>
Cumulative
For the three months For the six months Amounts since
ended June 30, ended June 30, November 20,
-------------------------- -------------------------- 1991 (date of
1997 1996 1997 1996 inception)
---------- -------- ---------- -------- -----------
REVENUE
Clinical fees $ 0 $ 0 $ 0 $ 0 $ 108,200
---------- ---------- ---------- ---------- ------------
Total Revenue 0 0 0 0 108,200
EXPENSES
License 0 0 0 0 1,001,500
Research and development 29,363 89,517 29,664 150,248 1,736,720
General and administrative 57,037 403,007 218,721 579,525 4,188,507
---------- ---------- ---------- ---------- ------------
Total Expenses 86,400 492,524 248,385 729,773 6,926,727
---------- ---------- ---------- ---------- ------------
NET LOSS FROM OPERATIONS (86,400) (492,524) (248,385) (729,773) (6,818,527)
OTHER INCOME / (EXPENSE) (19,703) (6,285) (31,230) (12,066) (91,311)
---------- ---------- ---------- ---------- ------------
LOSS BEFORE INCOME TAXES (106,103) (498,809) (279,615) (741,839) (6,909,838)
AND EXTRAORDINARY ITEM
INCOME TAXES 0 0 0 0 0
---------- ---------- ---------- ---------- ------------
LOSS BEFORE EXTRAORDINARY (106,103) (498,809) (279,615) (741,839) (6,909,838)
ITEM
FORGIVENESS OF DEBT 0 0 0 673,486 1,235,536
---------- ---------- ---------- ---------- ------------
NET INCOME $(106,103) $ 498,809 $(279,615) $(68,353) $(5,674,302)
========== ========== ========== ========== ============
INCOME / (LOSS) PER SHARE
Loss from continuing
operations $ (0.00) $ (0.02) $ (0.01) $ (0.03) $ (0.36)
Gain from debt
forgiveness 0.00 0.00 0.00 0.03 0.06
----------- ----------- ------------ ----------- ------------
Income / (loss) per
share $ (0.00) $ (0.02) $ (0.01) $ 0.00 $ (0.29)
=========== ============ ============ =========== ============
WEIGHTED AVERAGE NUMBER
OF SHARES 21,879,944 22,603,903 21,778,359 22,308,461 19,267,551
=========== ============ ============ =========== ============
</TABLE>
<PAGE>
MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
Cumulative
For the six months Amounts since
ended June 30, November 20,
-------------------- 1991 (date of
1997 1996 inception)
---------- ---------- -------------
OPERATING ACTIVITIES
Net income (loss) for the
period $ (279,615) $ (68,353) $ (5,674,302)
Add non-cash items
Common stock issued for
services and license 0 199,050 3,215,611
Reduction of legal costs 0 0 (130,000)
Depreciation 7,628 5,915 25,269
Loss on disposal of equipment 0 0 6,330
Gain on debt restructuring 0 (673,486) (1,235,536)
Write-off receivables 0 0 193,965
Decrease (increase) in:
Receivables 22,485 20,796 15,316
Prepaid Expenses 8,088 65,860 (2,692)
Other assets (1,090) 0 (2,260)
Increase (decrease) in:
Accounts payable 61,386 (28,060) 575,642
Accrued expenses (16,066) 2,365 31,454
Short term notes payable 51,000 0 51,000
---------- ---------- -----------
Net Cash from Operations (145,824) (475,913) (2,930,203)
INVESTING ACTIVITIES
Purchases of equipment (5,082) (10,685) $ (78,942)
Payments received on note
receivable 0 0 52,629
---------- ----------- ------------
Net Cash from Investing Activities (5,082) (10,685) (26,313)
FINANCING ACTIVITIES
Payment of notes payable (1,385) 0 (4,743)
Increase in notes payable 0 13,989 316,700
Equity contributed 0 0 131,374
Proceeds from issuance of
common stock 147,500 574,485 2,533,700
---------- ---------- ------------
Net Cash from Financing
Activities 146,115 588,474 2,977,031
---------- ---------- ------------
NET INCREASE / (DECREASE) IN CASH (4,791) 101,876 20,515
CASH, BEGINNING PERIOD 25,306 37,833 0
CASH ENDING PERIOD $ 20,515 $ 139,709 $ 20,515
========== ========== ===========
<PAGE>
MEDICAL DISCOVERIES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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
June 30, 1997 and the results of operations and changes in financial
position for the six-month period ended June 30, 1997. The results
of operations for the six months ended June 30, 1997 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.
DIRECTOR OF APPLICATIONS RESEARCH.
As MDI moves into the pre-clinical, pre-commercialization phase of its
product development, it is an absolute necessity that the company
establishes a well organized, thoroughly documented approach to
investigating research applications, identifying research sites, and
effectively monitoring progress. This requires that the company hire a
proven scientist with a strong background in biochemical and
bacteriological research; someone who is adept in the clinical research
setting, as well as possessing an astute scientific mind. MDI is pleased to
announce that John Griesgraber has accepted the newly created position
of Director of Applications Research. Mr. Griesgraber brings experience
in the fields of scientific research, product development and biochemical
research as related to metabolic disease states. He was formerly
President, Founder and co-owner of Terra Marine Bio-chemical. Bio-
organics and chemical processes for international distribution.
Previously, he held positions as a Research Associate at the University of
California, San Diego, the Salk Institute, La Jolla, California, and was an
Applications Engineer at IVAC Corporation during its early stages of
development and growth. Mr. Griesgraber's knowledge,experience and
familiarity with wound planning, organization and implementation
brings renewed vigor to Dr. Novick's USA Scientific Research Team.
<PAGE>
SCIENTIFIC RESEARCH AND DEVELOPMENT PROGRAM IN JAPAN.
"Electrically hydrolyzed saline" ("Function Water" as it is known in
Japan) has received rapid and intense attention in Japan. In support of
this technology, the Japanese government has established a special
organization to study the applications for this technology. The name for
this organization is the Function Water Foundation. Japan currently has
as many as 35 separate companies developing products to make the
benefits of "Function Water" available for a wide variety of
applications. The activity in Japan is an excellent opportunity to develop key
relationships that will enhance the company's understanding and
development of these technologies as MDI prepares to enter worldwide
markets in the future. MDI must be aware, active and involved with
respect to this technological development. The company has therefore
appointed Shouji Kubota, Ph.D., to head up MDI's Scientific Research and
Development program in Japan. Dr. Kubota's reputation is well
established and widely respected. He is a specialist in the understanding
and development of electrically hydrolyzed saline solutions (Function
Water"), and has published an authoritative text on this subject. Dr.
Kubota is currently the president of The Society for the Study of water
Design. This Society was established in 1987, for the purpose of
investigating and developing the potential and future applications of
Function Water. Dr. Kubota has been president of this Society since 1995.
Previously, Dr. Kubota was with the Hitachi Institute of Hitachi
Seisakusyo where he had a distinguished 25 year career. He is also
Adjunct Professor in the Engineering Department at Ibaragi University,
and serves as vice-president of the Society of Subtle Energy Institute.
ADDITION TO MDI'S MEDICAL SCIENTIFIC ADVISORY BOARD.
MDI has added Dr. Dennis E. Winson, DDS to MDI's Medical Scientific
Advisory Board. Dr. Winson is Associate Professor in the Department of
Periodontics at the University of Maryland, and maintains his clinical
practice in Bethesda. Dr. Winson is an Officer in the American Academy
of Periodontology, and has been on its Board of Trustees since 1990. Dr.
Winson's Expertise in the field of periodontal disease and dentistry is a
valuable addition to our scientific and research efforts as MDI investigates
potential applications of its technologies in the dental area of medicine.
APPOINTMENT OF REGULATORY AFFAIRS CONSULTANT.
The strength of MDI will, undoubtedly, be based not only on its abilities
to further develop and refine its core technologies, but also to produce
revenue generating opportunities for the company. In order to achieve
revenues, MDI must chart a timely and an effective course in order to
obtain FDA approval for the sales of its products in the United States.
To this end, the company has engaged the services of Dr. Jur Strobos, MD,
Esquire, of the law firm of Greenberg and Traurig, Washington, DC, to
assist MDI as its Regulatory Affairs consult. Dr. Strobos received his
medical degree from the University of Chicago, and has over twenty
years experience in Medicine at both Georgetown University and George
Washington University School of Medicine. In 1987, Dr. Strobos received
his Juris Doctorate from the University of Pennsylvania and insurance
litigation, and Food And Drug Administrative Law. From 1992 to 1995
Dr. Strobos was Director, Policy Research Staff, Office of Policy for the US
Food and Drug Administration. At Greenberg and Traurig, Dr. Strobos'
expertise is in the area of regulatory approvals as it pertains to
biotechnology and pharmaceutical applications.
These new appointment s and changes in MDI'S science and technology
group will strengthen and advance the company's core technologies with
a strong, effective and focused professional program under the overall
leadership and guidance of Dr. Novick and his USA and Japanese teams.
<PAGE>
PATENT ACTIVITY.
Recently MDI received notification from the United States Patent Office
that yet another patent is pending on the company's core technologies.
The latest Continuation In Part (CIP) is entitled: "System and Method For
Electrolyzing Fluids for Use as Anti-Microbial Agents". This latest news
brings a total of 3 patents to the company, adding strength on which MDI
can build and protect its business.
ADDITIONAL FUNDING IS REQUIRED.
It is clear that MDI will need to raise additional capital to fund our FDA
and international regulatory approvals process. Additionally, each of the
research and testing programs in progress continues to show promise and
generate valuable scientific data, and therefore, requires appropriate
levels of funding. Management intends to raise substantial additional
funds in private stock offerings in the near future in order to meet its
near-term funding requirements with a special emphasis in Japan. 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.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved in any litigation and there has been no
change in any with regard to any potential legal dispute since the filing of
the Company's 10QSB for the period ended June 30, 1996.
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
N/A
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
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: August 14, 1997 /s/ Lee F. Kulas
---------------------------
President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM MEDICAL DISCOVERIES,
INC. JUNE 30, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 20,515
<SECURITIES> 0
<RECEIVABLES> 49,033
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 72,240
<PP&E> 79,313
<DEPRECIATION> (23,809)
<TOTAL-ASSETS> 135,497
<CURRENT-LIABILITIES> 795,449
<BONDS> 0
0
0
<COMMON> 6,269,233
<OTHER-SE> (7,246,379)
<TOTAL-LIABILITY-AND-EQUITY> 135,497
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 248,385
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,230
<INCOME-PRETAX> (279,615)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (279,615)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
