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, 2000
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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)
1800 South West Temple, Suite 304, Salt Lake City, Utah 84115
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(Address of principal executive offices)
(801) 463-9311
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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
=== ===
<PAGE>
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: 26,656,959
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as of May 31, 2000.
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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 Sheet as of March 31, 2000 (unaudited)
Statements of Operations for the three-month periods ended
March 31, 2000 (unaudited) and March 31, 1999 (unaudited)
and since inception through March 31, 2000 (unaudited)
Statements of Cash Flows for the three-month periods ended
March 31, 2000 (unaudited) and March 31, 1999 (unaudited)
and since inception through March 31, 2000 (unaudited)
Notes to Unaudited Financial Statements
<PAGE>
MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
March 31, 2000
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CURRENT ASSETS
<S> <C>
Cash $ 563
Inventory 96,859
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Total Current Assets 97,422
PROPERTY AND EQUIPMENT
Equipment 108,521
Less: Accumulated depreciation (82,099)
----------
Net Property and Equipment 26,422
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Total Assets $ 123,844
===========
CURRENT LIABILITIES
Accounts payable $1,789,622
Accrued expenses 122,654
Current maturities of:
Notes payable 407,807
Convertible notes payable 200,983
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Total Current Liabilities 2,521,066
STOCKHOLDERS' DEFICIT
Common Stock, no par value,
authorized 100,000,000 9,913,837
shares; 26,656,959 shares
issued and outstanding
Retained deficit (12,198,559)
Subscription receivables (112,500)
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Total Stockholders' Deficit (2,397,222)
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 123,844
============
</TABLE>
<PAGE>
MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
For the three months Amounts since
ended March 31, November 20,
-------------------------- 1991 (date of
2000 1999 inception)
---------- --------- -------------
REVENUE
<S> <C> <C> <C>
Revenue and fees $ 7,620 $ 0 $ 134,229
Interest 0 0 23,406
---------- ---------- -------------
Total Revenue 0 0 150,015
EXPENSES
Cost of Sales $ 2,511 $ 0 $ 10,261
License 0 0 1,001,500
Research and development 0 58,637 2,272,291
General and administrative 49,559 103,647 7,910,145
Interest 14,632 44,394 209,460
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Total Expenses 66,702 206,678 11,403,657
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LOSS BEFORE INCOME TAXES ( 59,082) (206,678) (11,246,022)
AND EXTRAORDINARY ITEM
INCOME TAXES 0 0 0
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LOSS BEFORE EXTRAORDINARY ( 59,082) (206,678) (11,246,022)
ITEM
FORGIVENESS OF DEBT 0 0 1,235,536
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NET LOSS $( 59,082) $(206,678) $(10,010,486)
========== ========== =============
INCOME / (LOSS) PER SHARE
Loss from continuing
operations $ (0.00) $ (0.01) $ (0.57)
Gain from debt
forgiveness 0.00 0.00 0.06
---------- ----------- -------------
Income / (loss) per
share $ (0.00) $ (0.01) $ (0.51)
=========== =========== =============
WEIGHTED AVERAGE NUMBER
OF SHARES 26,656,959 26,395,847 19,677,320
</TABLE>
============ ============== =============
<PAGE>
MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
For the three months Amounts since
ended March 31, November 20,
-------------------- 1991 (date of
2000 1999 inception)
----------- ----------- -------------
OPERATING ACTIVITIES
Net income (loss) for the
<S> <C> <C> <C>
period $ ( 59,082) $ (206,679) $(10,798,982)
Add non-cash items
Common stock options issued
for services 0 0 2,556,890
Common stock issued for
services and license 0 30,000 3,559,986
Reduction of legal costs 0 0 (130,000)
Depreciation 2,771 3,612 83,558
Loss on disposal of equipment 0 0 30,364
Gain on debt restructuring 0 0 (1,235,536)
Write-off receivables 0 0 193,965
Decrease (increase) in:
Receivables 0 205 (7,529)
Inventory (2,511) ( 7,473) ( 96,859)
Prepaid Expenses 0 4,111 0
Other assets 900 509 0
Increase (decrease) in:
Accounts payable 8,811 85,773 1,633,713
Accrued expenses (14,500) (16,793) 144,135
---------- ----------- ------------
Net Cash from Operations ( 29,589) (107,145) (4,066,295)
INVESTING ACTIVITIES
Purchases of equipment 0 0 (132,184)
Payments received on note
receivable 0 0 130,000
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Net Cash from Investing Activities 0 0 (2,184)
FINANCING ACTIVITIES
Increase in notes payable 20,000 105,000 553,613
Payment of notes payable 0 (50,000) (188,004)
Increase in notes payable 0 0 316,700
Equity contributed 0 0 131,374
Proceeds from issuance of
common stock 0 0 3,255,359
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Net Cash from Financing
Activities 20,000 55,000 4,069,042
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NET INCREASE / (DECREASE) IN CASH ( 9,589) (52,145) 563
CASH, BEGINNING PERIOD 10,152 84,847 0
---------- ----------- ------------
CASH ENDING PERIOD $ 563 $ 32,702 $ 563
========== =========== ============
</TABLE>
<PAGE>
MEDICAL DISCOVERIES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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, 2000 and the
results of operations and changes in financial position for the three-month
period ended March 31, 2000. The results of operations for the three months
ended March 31, 2000 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
OPERATIONS AND LIQUIDITY
Medical Discoveries, Inc. ("MDI") booked revenue of $7,620 for the period from
January 1, 2000 to March 31, 2000 compared to $0 in revenue for the same period
in 1999. The revenue resulted from sales of MDI HealthCare Systems
("MDI-HCS")inventory to Advanced Sales Corporation ("ASC") (see Subsequent
Events below for an explanation of ASC). ASC has initiated sales of MDI-HCS
products as described in "Related Events" below.
MDI spent $0 in research and development costs during the first three months of
2000 compared to $58,637 for the same period in last year. The absence of
research and development work during the first three months of 2000 is a result
of the unavailability of funds to conduct research. MDI reduced its General and
Administrative expense to $49,559 from $103,647. Funds to support operations
came from loans from MDI's investment partner described in "Subsequent Events"
below. Additional funding for on-going operations is discussed in the
"Additional Funding is Required" section below.
<PAGE>
SUBSEQUENT EVENTS
On June 16, 2000, the Board of MDI approved a resolution to accept the
investment proposal from an outside investment group based on a letter of intent
signed in October 1999 and disclosed in the Company's previous 10KSB for the
1999 fiscal year. The letter of intent provides for a joint venture between MDI
and the outside investment group to sell MDI-HCS products. The entity to be
created by the joint venture is Advanced Sales Corporation or ASC as noted above
in the Operations and Liquidity section. The outside investment group has formed
Advanced Sales Corporation and in anticipation of the joint venture agreement,
MDI and ASC executed an agreement in the fourth quarter of 1999 that allows ASC
to market MDI-HCS products. The term of this agreement was for 120 days and was
renewable on a monthly basis. The agreement was an interim step pending
completion of joint venture agreement between MDI and the outside investment
group.
The Company plans for the joint venture to generate cash for further development
of MDI-P. MDI has also initiated discussions with the investment group for a
direct investment in MDI. Under the terms of the agreement with the outside
investment group, the investment group will provide funds of $750,000 to the
joint venture and will extend a $150,000 line of credit to MDI (of which the
Company has previously drawn $76,000). MDI will assign all rights it owns in HCS
products to the joint venture. MDI will own 42 percent of the joint venture. The
investment group will receive 25,000,000 shares of MDI stock.
RELATED EVENTS
ASC (the company that MDI holds a 42 percent ownership interest in) has launched
sales of MDI-HCS products. ASC personnel attended the international esthetics,
cosemetics and spa conference trade show in Las Vegas in June 2000. Reception
for the MDI-HCS products was positive and ASC had sales orders of over $4,500
during the three-day show.
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. The funds to be
raised will be used in the following areas: 1) submission of an IND Application
with the FDA for it novel Anti-HIV/AIDS drug, 2) the launch of MDl-HCS. 3)
payment of the MDI Trust Fund obligations, 4) commencement of payment of
salaries to Company personnel, and 5) at such time as funds become available,
the prior debts of the Company.
FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs of management as well as
assumptions made by, and information currently available to, management. When
used in this document, the words "anticipate," "believe," "should," "project,"
"estimate," "expect," "intend" and similar expressions, as they relate to the
Company or its management, are intended to identify forward-looking statements.
Such statements reflect the current view of the Company respecting future events
and are subject to certain risks, unce3rtainties, and assumptions, including the
risks and uncertainties noted throughout the document. Although the Company has
attempted to identify important factors that could cause the actual results to
differ materially, there may be other factors that cause the forward statement
not to come true as anticipated, believed, projected, expected, or intended.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may differ materially
from those described herein as anticipated, believed, projected, estimated,
expected, or intended.
General risk factors that my impact the Company's operations include the market
acceptance of competitive products, obsolescence caused by new technologies, the
possible introduction by competitors of new products that claim to have many of
the advantages of the Company's products at lower prices, the timing and market
acceptance of the Company's own new product introductions.
<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 10KSB for the year ended December 31, 1999.
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.
<PAGE>
The following are exhibits to this Form 10-QSB.
EXHIBIT NUMBER DESCRIPTION
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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: June 21, 2000 /s/ David Walker
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Chairman of the Board
