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

                                   FORM 10-QSB

[XX]- Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934 For the Quarterly Period Ended June 30, 2004
      Commission File Number 333-76427

[-]-  Transition Report under Section 13 or 15(d) of the Exchange Act
      For the Transition Period from -
      Commission File Number -

                             MDI Technologies, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

       Delaware                                               84-1165714
------------------------                                ------------------------
(State of Incorporation)                                (IRS Employer ID Number)

940 West Port Plaza, #100                                St.Louis, MO. 63146
----------------------------------------                 -------------------
(Address of Principle Executive Offices)                 (city) (state) (zip)

                                 (314) 439-6400
                          ---------------------------
                          (Issuer's telephone number)

      ---------------------------------------------------------------------
     (Former name, former address, and former fiscal year, if changed since
                                  last report)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [XX]
Yes [XX] No [ ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

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

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of the Registrant's $.001 par value common
stock on August 13,2004 was 11,366,823 shares.

Transitional Small Business Disclosure format (check one): Yes [ ]  No [XX]

                                       1

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                             MDI TECHNOLOGIES, INC.
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                     PAGE
                                                                                                     ----
<S>                                                                                                  <C>
PART I. FINANCIAL INFORMATION

        Item 1. Financial Statements                                                                    3-6

        Item 2. Management's Discussion and Analysis or Plan of Operation                              7-11

        Item 3. Controls and Procedures                                                                  11

PART II. OTHER INFORMATION

        Item 1. Legal Proceedings                                                                        12

        Item 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities           12

        Item 3. Defaults Upon Senior Securities                                                          12

        Item 4. Submission of Matters to a Vote of Security Holders                                      12

        Item 5. Other Information                                                                        12

        Item 6. Exhibits and Reports On Form 8-K                                                         12

        Signatures                                                                                       14

        Exhibit                                                                                          15

        Certifications                                                                                16-21
</TABLE>

                                       2

<PAGE>

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

                      MDI Technologies, Inc. and Subsidiary
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                        (Unaudited)
                                                       June 30, 2004  Dec.31, 2003
<S>                                                    <C>            <C>
ASSETS

CURRENT ASSETS

Cash                                                      2,233,031     1,988,816
Restricted cash                                             250,812       250,189
Accounts receivable, net                                  1,075,944       933,668
Other current assets                                        141,842       100,093
Deferred tax asset                                                0       228,700
                                                         ----------    ----------
         Total Current Assets                             3,701,629     3,501,466

PROPERTY AND EQUIPMENT, at cost                           1,364,823     1,259,961
      Less Accumulated depreciation                        (832,492)     (759,707)
                                                         ----------    ----------
         Total Property and Equipment, net                  532,331       500,254

INTANGIBLES, NET                                            642,600       736,265

OTHER ASSETS                                                577,609       333,110
                                                         ----------    ----------
      TOTAL ASSETS                                        5,454,169     5,071,095
                                                         ==========    ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current portion of long-term debt                            46,827        92,501
Accounts payable and accrued expenses                       872,019       612,280
Deferred revenue                                            458,152       631,741
Contingent acquisition liability                                  0       101,148
                                                         ----------    ----------
         Total Current Liabilities                        1,376,998     1,437,670

DEFERRED TAX LIABILITY                                      167,920        83,000

DEFERRED COMPENSATION LIABILITY                              82,567        80,807

STOCKHOLDERS' EQUITY

Common stock, par value of $.001 per share, 50,000,000
shares authorized, 11,415,323 shares at June 30,2004
and 11,655,585 at December 31,2003 issued
and outstanding                                              11,415        11,656
Additional paid-in capital                                3,895,989     4,499,068
Accumulated deficit                                         (80,720)   (1,041,106)
                                                         ----------    ----------
                                                          3,826,684     3,469,618

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                5,454,169     5,071,095
                                                         ==========    ==========
</TABLE>

     The accompanying notes are an integral part of the financial statements

                                       3

<PAGE>

                      MDI Technologies, Inc. and Subsidiary
                Consolidated Statements of Operations (Unaudited)

<TABLE>
<CAPTION>
                                                  FOR THE THREE MONTHS ENDED     FOR THE SIX MONTHS ENDED
                                                           JUNE 30,                      JUNE 30,
                                                     2004            2003          2004            2003
                                                     ----            ----          ----            ----
<S>                                               <C>             <C>           <C>              <C>
REVENUES
     ASP and Support Revenues                       1,629,943      1,291,182    3,203,759         2,501,736
     Shrink Wrap Sales                                615,643        548,807    1,723,186         1,346,964
     Training Fees                                     89,101         66,194      174,202           167,048
                                                   ----------     ----------    ---------        ----------
         Total Revenue                              2,334,687      1,906,183    5,101,147         4,015,748

OPERATING EXPENSES
     Operations and technical support                 579,646        463,488    1,122,015           904,426
     Sales and marketing                              357,684        391,717      828,746           857,257
     Engineering                                      187,227        142,327      360,963           279,644
     General and administrative                       595,959        342,540    1,246,491           835,295
                                                   ----------     ----------    ---------        ----------
         Total Operating Expenses                   1,720,516      1,340,072    3,558,215         2,876,622
                                                   ----------     ----------    ---------        ----------
OPERATING INCOME                                      614,171        566,111    1,542,932         1,139,126

OTHER INCOME (EXPENSE)
     Interest income                                    4,521          1,634        7,913             2,375
     Interest expense                                    (777)        (1,895)      (1,839)           (4,062)
                                                   ----------     ----------    ---------        ----------
                                                        3,744          ( 261)       6,074            (1,687)
                                                                  ----------    ---------        ----------
INCOME TAX (PROVISION) BENEFIT                       (234,805)       691,000     (588,620)          691,000
                                                   ----------     ----------    ---------        ----------
NET INCOME                                            383,110      1,256,850      960,386         1,828,439
                                                   ==========     ==========    =========        ==========
NET INCOME PER SHARE-BASIC                               0.03           0.11         0.08              0.16
NET INCOME PER SHARE-DILUTED                             0.03           0.11         0.08              0.15
WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES ISSUED AND OUTSTANDING-
     BASIC                                         11,413,950     11,487,048   11,498,013        11,625,656
     DILUTED                                       12,147,478     11,812,098   12,227,850        11,884,284
</TABLE>

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

                                       4

<PAGE>

                      MDI TECHNOLOGIES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENT OF STOCKHOLDERS'EQUITY
                     FOR THE SIX MONTHS ENDED June 30, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                       ADDITIONAL
                                   COMMON STOCK          PAID-IN     ACCUMULATED       STOCKHOLDERS'
                                 Shares      Amount      CAPITAL       DEFICIT            EQUITY
                                ----------  --------    ---------    ----------        -------------
<S>                             <C>         <C>        <C>           <C>               <C>
Balance, December 31, 2003      11,655,585    11,656    4,499,068    (1,041,106)         3,469,618

Exercise of Stock Warrants
  and Stock Options                122,838       122      114,529                          114,651

Purchase and Retirement of
  Treasury Stock                  (363,100)     (363)    (717,608)                        (717,971)

Net Income                                                              960,386            960,386
                                ----------  --------    ---------    ----------          ---------
Balance, June 30, 2004          11,415,323    11,415    3,895,989       (80,720)         3,826,684
                                ==========  ========    =========    ==========          =========
</TABLE>

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

                                       5

<PAGE>

                      MDI Technologies Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                       FOR SIX MONTHS ENDED JUNE 30,
                                                                            2004           2003
                                                                            ----           ----
<S>                                                                    <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                                 960,386     1,828,439

Adjustments to reconcile net income to net cash provided
  by operating activities:
    Depreciation and amortization                                          200,106        88,458
    Deferred taxes                                                         228,700      (691,000)
    Change in assets and liabilities:
       Increase in accounts receivable                                    (142,276)     (280,084)
       Increase in prepaid expenses and other assets                       (42,372)      (77,462)
       Increase (decrease) in accounts payable and
         accrued liabilities                                               178,900       (66,630)
                                                                        ----------    ----------
Net cash provided by operating activities                                1,383,444       802,021

CASH FLOWS USED IN INVESTING ACTIVITIES
   Purchase of equipment                                                  (144,588)      (68,130)
   Payments for capitalized software development                          (234,647)            0
   Payments for Horizon Healthcare Technologies                           (111,000)            0
                                                                        ----------    ----------
Net cash used in investing activities                                     (490,235)      (68,130)

CASH FLOWS FROM FINANCING ACTIVITIES
   Payments on long-term debt                                              (45,674)      (54,809)
   Loan To repurchase treasury stock                                            --       180,500
   Purchase of treasury stock                                             (717,971)     (327,483)
   Exercise of stock options and warrants                                  114,651        34,789
                                                                        ----------    ----------
Net cash used in financing activities                                     (648,994)     (167,003)

NET INCREASE IN CASH                                                       244,215       566,888

CASH - BEGINNING OF PERIOD                                               1,988,816       454,848
                                                                        ----------    ----------
CASH - END OF PERIOD                                                     2,233,031     1,021,736
                                                                        ==========    ==========
</TABLE>

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

                                       6

<PAGE>

                      MDI Technologies, Inc. and Subsidiary
                   Notes To Consolidated Financial Statements

1. INTERIM FINANCIAL INFORMATION-BASIS OF PRESENTATION

These statements reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for fair
presentation of the information contained therein. The Company follows the same
accounting policies in preparation of interim reports as it does in its annual
reports.

The accompanying consolidated interim financial statements include the accounts
of MDI Technologies, Inc. and its wholly owned subsidiary, MDI Technologies,
Inc., a Missouri corporation formerly known as Management Data, Inc.,
(collectively the "Company") and have been prepared by the Company, without
audit, in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the instructions
for Form 10-QSB. The consolidated balance sheets as of June 30,2004 and the
consolidated statements of operations for the three and six months ended June
30,2004 and 2003 and the consolidated statements of cash flows for the six
months ended June 30,2004 and 2003, are unaudited but include all adjustments
(consisting of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the financial position at such date and the
operating results and cash flows for those periods. Although the Company
believes that the disclosures in these financial statements are adequate to make
the information presented not misleading, certain information normally included
in financial statements and related footnotes prepared in accordance with
accounting principles generally accepted in the United States of America have
been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Results for any interim period are not
necessarily indicative of results for any other interim period or for the entire
year. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the consolidated
financial position as of June 30,2004 and the consolidated results of operations
and consolidated statement of cash flows for the periods presented. The results
of operations for the three and six months ended June 30, 2004 and 2003 are not
necessarily indicative of results to be expected for the full year.

It is suggested that these consolidated financial statements be read in
conjunction with the financial statements and related notes thereto included in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 2003.

2. REVENUE RECOGNITION

The Company's revenue is derived from the licensing of computer software and
from service revenues consisting of ASP (Application Service Provider) data
hosting, maintenance and support of systems, training and consulting. License
fees are recognized when the license agreement has been signed, the software has
been shipped, the fees are fixed and determinable and collection is probable.
Revenue from the ASP, software maintenance and support is recognized ratably
over the contract period, these items are billed monthly at the time the
service/support is due from the customer for the current month's service and is
due 30 days from billing. The Company establishes a reserve for collectability
of that maintenance and support receivable. All costs associated with licensing,
ASP services, support and update services, training and consulting services are
expensed as incurred.

There are no customers that make up 10% or more of our revenues. There is one
group of related facilities that does comprise approximately 17% of the
Company's receivables. This group however, is paying currently on agreed upon
terms.

3. INCOME TAX BENEFIT

                                       7

<PAGE>

The Company had net operating loss carryforwards of approximately $620,000 at
December 31, 2003. All of these carryforwards are utilized at June 30, 2004.

4. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net income by the
weighted average common shares outstanding during the period. For purposes of
computing diluted earnings per share, dilutive securities are not included when
the effect is anti-dilutive.

Options to employees, directors and consultants to purchase 955,927 shares of
common stock and warrants to purchase 300,000 shares of common stock were
outstanding as of June 30, 2004. Options for 955,927 shares (no warrants
applicable) were included in the calculation of diluted earnings per share for
the three and six months ended June 30,2004.

Options to employees, directors and consultants to purchase 1,017,481 shares of
common stock and warrants to purchase 953,020 shares of common stock were
outstanding as of June 30, 2003. Options to employees, directors and consultants
for 227,699 and 79,825 shares were included in the calculation of diluted
earnings per share for the three and six months ended June 30, 2003.

5. STOCK OPTIONS

The Company has adopted the disclosure requirement of Statement of Financial
Accounting Standards No. 148 (SFAS 148), "Accounting for Stock-Based
Compensation-Transition and Disclosure" effective December 15, 2002. SFAS 148
amends Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based compensation and also amends the disclosure requirements of SFAS
123 to require prominent disclosures in both annual and interim financial
statements about the methods of accounting for stock-based employee compensation
and the effect of the method used on report results. As permitted by SFAS 148
and SFAS 123, the Company continues to apply the accounting provisions of APB
25,"Accounting for Stock Issued to Employees", and related interpretations, with
regard to the measurement of compensation cost for options granted under the
Company's equity compensation plan. No employee compensation expense has been
recorded as all options granted had an exercise price equal to the market value
of the underlying common stock on the date of grant. The pro forma effect on our
results of operations, had expense been recognized using the fair value method
described in SFAS 123, using the Black-Scholes option-pricing model, is shown
below.

<TABLE>
<CAPTION>
                                                   Three Months Ended June 30,     Six Months Ended June 30,
                                                   --------------------------      -------------------------
                                                    2004             2003           2004            2003
                                                    -----            -----          ----            ----
<S>                                               <C>            <C>              <C>            <C>
Net income, as reported                               383,110        1,256,850        960,386        1,828,439
Deduct: Total stock based employee compensation
        expense determined under fair value
        based method for all awards                    (5,115)         (50,845)       (25,720)        (100,048)
                                                  -----------    -------------    -----------    -------------
Pro forma net income                                  377,995        1,206,005        934,666        1,728,391
                                                  ===========    =============    ===========    =============
Earnings per share:
Basic -   as reported                             $      0.03    $        0.11    $      0.08    $        0.16
Basic -   pro forma                               $      0.03    $        0.10    $      0.08    $        0.15
Diluted - as reported                             $      0.03    $        0.11    $      0.08             0.15
Diluted - pro forma                               $      0.03    $        0.10    $      0.08    $        0.15
</TABLE>

                                       8

<PAGE>

                           FORWARD-LOOKING STATEMENTS

Statements made in this Form 10-QSB that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 ("The Act") and Section 21E of the
Securities Act of 1934. These statements often can be identified by the use of
terms such as "may","will","expect","believes","anticipate",
"estimate","approximate", or "continue", or the negative thereof. The Company
intends that such forward-looking statements be subject to the safe harbors for
such statements. The Company wishes to caution readers not to place undue
reliance on any such forward looking statements, which speak only as of the date
made. Any forward looking statements represent management's best judgment as to
what may occur in the future. However, forward looking statements are subject to
risks, uncertainties, and important factors beyond the control of the Company
that could cause actual results and events to differ materially from historical
results of operations and events and those presently anticipated or projected.
These factors include adverse economic conditions, entry of new and stronger
competitors, inadequate capital, unexpected costs and failure to capitalize upon
access to new markets. You should understand that various factors, in addition
to those discussed elsewhere in this document, could affect the future results
of the Company and could cause results to differ materially from those expressed
in such forward-looking statements. The Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statement or to reflect the occurrence of
anticipated or unanticipated events.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The Company is continuing to expand its market share of long term care
facilities customers and the transition to an Application Service Provider (ASP)
model for delivering the accounting and clinical software used by these
customers. The facilities under contract currently exceed 1,500 in number, of
which 390 are using the ASP services.

Our limited operating history in the development and delivery of software over
the Internet makes it difficult to predict revenues and operating results. Our
prospects should be considered in light of the risks and difficulties
encountered by transitioning our revenue to that of a recurring revenue model
through the delivery of our applications over the Internet. The Company is
dependent on the continued rollout of broadband telecommunication services to
rural and metropolitan areas in order to successfully implement this strategy.

The Company has positioned itself as a primary resource in the long-term care
industry in complying with regulatory legislation. The Company updates its
software on a regular basis to insure programs accommodate the legal
requirements relating to the long-term care industry such as HIPPA.

 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2004 COMPARED TO THE
                        THREE MONTHS ENDED JUNE 30,2003

Net revenues for the three months ended June 30,2004 increased to $2,335,000
from $1,906,000 for the three months ended June 30, 2003. This increase of
$429,000 (23%) was primarily comprised of increased recurring revenues of
$339,000 (27%) from support and ASP services which is a result of having more
software sites installed compared with the previous period. There was also an
increase in "shrink wrap" sales of $67,000 (13%) compared with the previous
period, resulting from increased market penetration by our sales staff. Training
fee revenue increased $23,000 during the period due to increased off-site
training given and the sale of e.training materials.

Operations and Technical Support expense for the three months ended June 30,
2004 increased to $580,000 from $463,000 for the three months ended June 30,
2003. This increase of $117,000 (26%) is comprised of $51,000 of increased
payroll related costs due to payroll increases and additional staff, $81,000

                                       9

<PAGE>

increase in depreciation/amortization costs due to an increase in property and
equipment and intangible assets owned and $15,000 in decreased other costs.

Sales and Marketing expense for the three months ended June 30, 2004 decreased
to $358,000 from $392,000 for the three months ended June 30, 2003. This
decrease of $34,000 (9%) is due to payroll related and commission decreases of
$15,000 for marketing and sales personnel, decreased sales travel of $8,000, a
$15,000 increase in advertising and marketing due to increased advertising
placements convention costs, and decreased reseller costs and other costs of
$26,000 due to decreased sales by resellers and other miscellaneous reductions.

Engineering expense for the three months ended June 30, 2004 increased to
$187,000 from $142,000 for the three months ended June 30, 2003. This increase
of $45,000 (32%) was primarily due to increased payroll related to staff
increases and wage increases of $52,000 costs relating to program application
enhancements less decreases of $7,000 in other departmental costs.

General and administrative costs for the three months ended June 30,2004
increased to $596,000 from $342,000 for the three months ended June 30, 2003.
This increase of $254,000 (74%)is due to increased legal and consulting costs of
$152,000,increased payroll related items of $45,000, and increased insurance and
other general cost increases of $57,000 due to insurance and benefit increases.

Other income increased $3,000 due to increased invested cash.

The net income of $383,000 for the three months ended June 30,2004 compared to
$1,257,000 for the three months ended June 30,2003, reflects a decrease of
$874,000. The primary reason for the decrease, despite a 22% increase in
revenues and an 8% increase in operating income, is the fact that in 2003 the
Company utilized prior-period net operating loss carryforwards as an income tax
benefit, while in 2004 that benefit has been exhausted. The income tax benefit
recognition in the prior period versus income tax expense recorded in the
current period creates an income tax expense increase of $926,000. If the
Company continues to be profitable, it will continue to incur income tax expense
without benefit from prior year losses.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO THE SIX
                           MONTHS ENDED JUNE 30, 2003

Net revenues for the six months ended June 30, 2004 increased to $5,101,000 from
$4,016,000. This increase of $1,085,000 (27%) was primarily comprised of
increased recurring revenues of $702,000 (28%) from support and ASP services, an
increase in "shrink wrap" revenue of $376,000 (28%) and increased training fees
of $7,000 (5%).

Operations and Technical Support expense increased to $1,122,000 from $904,000
for the six months ended June 30, 2004. This increase of $218,000 (25%) is due
to payroll increases and staffing increases of $121,000, decreases in other
general items of $15,000 and depreciation/amortization expense increases of
$112,000.

Sales and Marketing expense decreased to $829,000 from $857,000 for the six
months ended June 30, 2004. This decrease of $28,000 (3%) is due to salary and
commission increases of $18,000, advertising and marketing increases of $9,000
and reseller fee decreases of $55,000 due to decreased reseller activity.

Engineering expense increased to $361,000 from $280,000 for the six months ended
June 30, 2004. This increase of $81,000 (29%) is due to payroll related
increases of $83,000, and other departmental decreases of $2,000.

General and Administrative expense increased to $1,246,000 from $835,000 for the
six months ended June 30, 2004. This increase of $411,000 (50%) is due to
$86,000 increases in payroll related items; legal, audit and consulting expenses
increases of $121,000, insurance costs increased by $38,000 for liability and
benefit coverage's, and the bad debt reserves were increased by $16,000. The
2003 period included a decrease in liability reserves no such item was required
in 2004, thus creating a $150,000 "increased" expense item in 2004.

                                       10
<PAGE>

Other income increased by $7,000 due to interest expense decreasing by $2,000
due to less outstanding debt and interest income increased $5,000 due to
additional invested funds.

The net income for the six months ended June 30, 2004 decreased to $960,000 from
$1,828,000 for the six months ended June 30, 2003. The primary reason for this
decrease of $868,000, in spite of a 27% increase in revenues and a 35% increase
in operating income, is the fact that in 2003 the Company utilized prior-period
net operating loss carryforwards as an income tax benefit, while in 2004 that
benefit has been exhausted. The income tax benefit recognition in the prior
period versus income tax expense recorded in the current period creates an
income tax increase of $1,279,620. If the Company continues to be profitable, it
will continue to incur income tax expense without benefit from prior-year
losses.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 2004 the Company completed its share
repurchase bid. The shares repurchased amounted to 531,600 during the twelve
months ended March 31, 2004 at a cost of $936,000. In April 2004, the Company
initiated its third issuer bid to purchase up to 631,150 shares. The bid will
terminate in April 2005 or at such earlier time as the Company may decide. As
indicated in Items 4 and 5 of Part II, 48,500 shares were repurchased at a cost
of $120,545.

During the six months ended June 30, 2003 the Company repurchased 646,000 shares
of its common stock for approximately $327,000. There were another 59,000 shares
in process of being purchased for approximately $66,000 but the transaction was
not completed until July 2003.

During the six months ended June 30, 2004 there were warrants exercised for
101,190 shares and 21,648 options exercised for which the Company received a
total of $115,000.

The Company, at June 30, 2004 has 955,927 stock options and 300,000 warrants
outstanding. The options and warrants are exercisable at prices ranging from
$.21 - $3.86 per share. If all vested options and warrants, that were then "in
the money" were exercised, the Company would receive approximately $375,385,
which would be available to the Company as working capital.

CASH FLOW

During the six months ended June 30, 2004, cash increased by $244,000. Net cash
provided by operating activities for the six months ended June 30, 2004 was
$1,383,000 compared to $802,000 for the six months ended June 30, 2003. This
increase of $581,000 was due to an decrease in the net income for the period
offset by increases in non-cash expenses and changes in accounts receivable and
liability balances.

Net cash used in investing activities for the six months ended June 30, 2004 was
$490,000 compared to $68,000 for the six months ended June 30, 2003. The funds
used for the six months ended June 30, 2004 were for office and ASP equipment of
$144,000, software development expenditures of $235,000 and Horizon Technologies
acquisition payments of $111,000. The cash used in investing activities for the
six months ended June 30, 2003 was for office and ASP equipment.

Net cash used in financing activities was $649,000 for the six months ended June
30, 2004 compared to $167,000 for the six months ended June 30, 2003. During the
six months ended June 30, 2004 funds were used for: debt payments of $45,000,
the purchase of 363,100 shares of MDI's common stock for $718,000 under the
Company's "Issuer Bid". There was also $115,000 received from the exercise of
stock options and warrants. During the six months ended June 30, 2003 funds were
used for: debt payments of $55,000 on a $180,500 promissory note for the
purchase of 475,000 MDI shares from a former MDI director, and the purchase of
646,000 shares of the Company's common stock for $327,000 under the Company's
"Issuer Bid". There was also $35,000 received from the exercise of stock
options.

                                       11
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

The Company's management, including its Chief Executive Officer and Chief
Financial Officer, have evaluated the effectiveness of the Company's disclosure
controls and procedures (as such term is defined in Rules 13a-14 and 15d-14
under Securities Exchange Act of 1934 (The Exchange Act) as of June 30, 2004
(the Evaluation date). Based on such evaluation, the Company's management has
concluded that the Company's disclosure controls and procedures are effective
for gathering, analyzing and disclosing the information required to be disclosed
in the Company's internal controls or in other factors that could significantly
affect these controls subsequent to the Evaluation Date.

In addition, there have been no changes in the Company's internal control over
financial reporting during the most recent fiscal quarter that has materially
affected, or os reasonably likely to materially affect, the Company's internal
control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable

Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities

      (a) and (b) Not applicable

      (c) The Company sold the following unregistered securities during the
      quarter

      Three groups of employee stock options were exercised during the quarter.
      As to each group the option holder paid the exercise price in cash and the
      Company issued common stock (par value $0.001 per share). No underwriters
      were used, no commissions were paid. Information concerning those
      exercises is set forth in the following table:

<TABLE>
<CAPTION>
            Number of     Price per      Total Price
  Date       Shares         Share          Received
  ----      --------      --------       ----------
<S>         <C>           <C>            <C>
4-22-04      2,927          $0.21        $   614.67
5-17-04      3,275           0.22            720.50
6-16-04      1,000           0.22            220.00
                                         ----------
                                         $ 1,555.17
</TABLE>

The sales were exempt from registration under Section 4(2) of the Securities Act
of 1933.

      (d) Not applicable

      (e) Repurchases of common stock during the quarter were as follows:

<TABLE>
<CAPTION>
                                            (c) Total Number           (d) Maximum Number
              (a) Total                    of Shares Purchased       (or Approximate Dollar
              Number of     (b) Average    as Part of Publicly      Value) of Shares That May
               Shares        Price Paid      Announced Plans        Yet Be Purchased Under the
  Period      Purchased      per Share         or Programs            the Plan or Programs
  ------      ---------      ----------    -----------------        --------------------------
<S>           <C>            <C>           <C>                      <C>
April, 2004      -0-            N/A              -0-                         631,150
May, 2004      38,500          $2.49            38,500                       592,650
June 2004      10,000          $2.35            48,500                       582,650
</TABLE>

Item 3. Defaults Upon Senior Securities

Not applicable

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

                                       12
<PAGE>

On June 9, 2004, the Company held its annual meeting of shareholders and the
following proposals were voted and approved by the shareholders;

The election of the individuals to serve on the Company's Board of Directors
until the next annual stockholder's meeting: Todd A. Spence, Di Anne Kerrigan,
Thomas Kerrigan and Michael Trokey.

The share votes were as follows:

<TABLE>
<CAPTION>
                     Common Stock   Common Stock    Common Stock    Common Stock    Broker
                      Votes For     Votes Against  Votes Withheld    Abstaining    Non-Votes
                     ------------   -------------  --------------   ------------   ---------
<S>                  <C>            <C>            <C>              <C>            <C>
Todd A. Spence        6,856,305         -0-            4,000            -0-         350,719
Di Anne Kerrigan      6,856,305         -0-            4,000            -0-         350,719
Thomas Kerrigan       6,853,305         -0-            7,000            -0-         350,719
Michael Trokey        6,856,305         -0-            4,000            -0-         350,719
</TABLE>

The appointment of Rubin, Brown, Gornstein Co. LLP as auditors for the Company
for the next year. The share votes were as follows:

<TABLE>
<CAPTION>
Common Stock    Common Stock    Common Stock    Common Stock   Broker
  Votes For     Votes Against  Votes Withheld    Abstaining   Non-Votes
------------   --------------  --------------   ------------  ---------
<S>            <C>             <C>              <C>           <C>
6,853,305           -0-             7,000          -0-         350,719
</TABLE>

The re-approval of the adoption of the Company's 2003 stock option plan and to
authorize the granting of options under the 2003 plan. The share votes were as
follows:

<TABLE>
<CAPTION>
Common Stock    Common Stock    Common Stock    Common Stock   Broker
  Votes For     Votes Against  Votes Withheld    Abstaining   Non-Votes
------------   --------------  --------------   ------------  ---------
<S>            <C>             <C>              <C>           <C>
2,136,505         10,500           -0-           4,713,300     350,719
</TABLE>

Item 5. Other Information

In April 2004 the Company filed a "Notice of Intention" to make a "Normal Course
Issuer Bid". The Company obtained approval of the TSX Venture Exchange, to
undertake a normal course issuer bid to purchase up to 631,150 shares of it's
then 11,408,121 issued and outstanding common shares being 5.5% of the Company's
issued and outstanding common shares. Purchases will be made on the open market
through facilities of the TSX Venture Exchange. The price paid will be the
prevailing market price of such common shares at the time of purchase. Any
shares purchased pursuant to the bid will be cancelled and returned to treasury.
The bid commenced on April 29, 2004 and will terminate on April 29,2005, or at
such earlier time as the bid has been completed. The Company reserves the right
to terminate the bid earlier if it feels that it is appropriate to do so. In May
and June 2004 the Company purchased 48,500 shares for $120,545 and retired these
shares.

Item 6. Exhibits and Reports on Form 8-K

(a)Exhibits: Exhibits required as part of this report are listed in the index
             appearing on page 15.

(b) Reports on Form 8-K

On July 22, 2004, the Company filed a current report on Form 8-K, reporting
under item 12 announcing the Company's preliminary estimated results for the
quarter ended June 30, 2004.

                                       13
<PAGE>

                                   SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorizes.

MDI Technologies, Inc.

/s/ Todd A. Spence                                     August 13, 2004
-------------------------------                        ---------------
Todd A. Spence                                               Date
Chairman of the Board, President and
Chief Executive Officer

/s/ Thomas K. Andrew                                   August 13, 2004
-------------------------------                        ---------------
Thomas K. Andrew                                             Date
Chief Financial Officer

                                       14
<PAGE>

                               INDEX TO EXHIBITS

   Exhibit
   -------

31.1   Certification of Chief Executive Officer required by Rule 13a-14(a) under
       the Exchange Act

31.2   Certification of Chief Financial Officer required by Rule 13a-14(a) under
       the Exchange Act

32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
       1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
       2002.

32.2   Certification of Chief Financial Officer pursuant to 18 U.S. C. Section
       1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
       2002.

                                       15