##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-QSB

(Mark One)

|      |  |                                                                                        
|----- |  | ---------------------------------------------------------------------------------------
|X Box |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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|      |  | For the quarterly period ended March 31, 2002                                          
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|      |  |                                                                                        
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|Box   |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT                        
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|      |  |                                                                                        
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|      |  | 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                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

738 Aspenwood Lane, Twin Falls, Idaho 83301

(Address of principal executive offices)


(208) 736-1799

(Issuers telephone number, including area code)


N/A

(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 preceding 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  X Box    No  Box

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: As of May 3, 2002, there
were 35,525,786 shares of the issuers Common Stock outstanding.

Transitional Small Business Disclosure Format (check one): Yes  Box    No  X Box





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TABLE OF CONTENTS



|                                        |                                                                                                |  |  |  |  |  |  | 
|--------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION           
|                                        | ITEM 1. FINANCIAL STATEMENTS                                                                  
|NOTES TO UNAUDITED FINANCIAL STATEMENTS
|                                        | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|PART II OTHER INFORMATION              
|                                        | ITEM 1. LEGAL PROCEEDINGS                                                                     
|                                        | ITEM 2. CHANGES IN SECURITIES                                                                 
|                                        | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                      
|SIGNATURES                             



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##### Table of Contents






PART I
FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

The following financial statements are filed with this report:



| |  |  | Condensed Consolidated Balance Sheet as of March 31, 2002, (unaudited) and
December 31, 2001                                                                                                                         
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Condensed Consolidated Statements of Operations for the three-month
periods ended March 31, 2002 (unaudited) and March 31, 2001 (unaudited)
and cumulative amounts since inception through March 31, 2002 (unaudited)
|
| |  |  | Condensed Consolidated Statements of Cash Flows for the three-month
periods ended March 31, 2002 (unaudited) and March 31, 2001 (unaudited)
and cumulative amounts since inception through March 31, 2002 (unaudited)
|
| |  |  | Notes to Unaudited Financial Statements                                                                                                                                                                              

2



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##### Table of Contents



MEDICAL DISCOVERIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2002 (Unaudited) and December 31, 2001

|                                                    |                                                                                                                                             |                             |                           |                      |            |                |         |                   |            |           |         | 
|--------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ------------------------- | -------------------- | ---------- | -------------- | ------- | ----------------- | ---------- | --------- | ------- | 
|                                                    |                                                                                                                                             |                             |                           |                      |            | March 31, 2002 |         | December 31, 2001
|                                                    |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|Current assets                                      |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cash                                                                                                                                        |                             | $                         | (5,993               | )          |                | $       | 2,481             |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Current portion of deferred charges                                                                                                         |                             |                           | 48,306               |            |                |         | 48,305            |           
|                                                    |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|                                                    |                                                                                                                                             |                             |                           | Total current assets |            |                | 42,313  |                   |            |           | 50,786  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Equipment, at cost, net of accumulated depreciation |                                                                                                                                             |                             | 286                       |                      |            |                | 679     |                  
|                                                   
|                                                   
|                                                   
|                                                   
|Deferred charges, less current portion              |                                                                                                                                             |                             | 48,304                    |                      |            |                | 60,381  |                  
|                                                    |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|                                                    |                                                                                                                                             |                             |                           | Total assets         |            | $              | 90,903  |                   |            | $         | 111,846 | 
|                                                    |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|Current liabilities                                 |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accounts payable                                                                                                                            |                             | $                         | 1,915,800            |            |                | $       | 1,832,340         |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accrued interest                                                                                                                            |                             |                           | 301,961              |            |                |         | 279,860           |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Current portion of notes payable                                                                                                            |                             |                           | 477,717              |            |                |         | 477,717           |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Convertible notes payable                                                                                                                   |                             |                           | 848,201              |            |                |         | 743,200           |           
|                                                    |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|                                                    |                                                                                                                                             |                             | Total current liabilities |                      |            | 3,543,679      |         |                   |            | 3,333,117 |        
|                                                   
|                                                   
|                                                   
|                                                   
|Stockholders deficit                               |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Escrow receivable                                                                                                                           |                             |                           | (227,300             | )          |                |         | (227,300          | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Additional paid in capital                                                                                                                  |                             |                           | 244,367              |            |                |         | 159,405           |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Common stock, no par value, authorized
100,000,000 shares; 34,706,917 shares
issued and outstanding at March 31, 2002
and December 31, 2001 |                             |                           | 10,797,526           |            |                |         | 10,797,526        |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accumulated deficit                                                                                                                         |                             |                           | (14,267,369          | )          |                |         | (13,950,902       | )         
|                                                    |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|                                                    |                                                                                                                                             | Total stockholders deficit |                           |                      | (3,452,776 | )              |         |                   | (3,221,271 | )        
|                                                    |                                                                                                                                             |                             |                           |                      |            |                |         |                  
|                                                    |                                                                                                                                             | $                           | 90,903                    |                      |            | $              | 111,846 |                  
|                                                    |                                                                                                                                             |                             |                           |                      |            |                |         |                  

See notes to consolidated financial statements

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MEDICAL DISCOVERIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Periods Ended March 31, 2002 and March 31, 2001, and Cumulative Amounts (Unaudited)

|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |          |           |             |             |  
|----------------------------------- | --------------------- | ------------------------------------------ | ---------------------------------- | ----------------------------------------------- | - | -------------------- | ---------- | ------------- | - | ---------- | ---------- | -------- | --------- | ----------- | ----------- | -
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |          |           | Cumulative 
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |          |           | Amounts    
|                                    |                       |                                            |                                    |                                                 |   | For the Three Months |            | Since        
|                                    |                       |                                            |                                    |                                                 |   | Ended March 31,      |            | November 20, 
|                                    |                       |                                            |                                    |                                                 |   |                      |            | 1991 (Date of
|                                    |                       |                                            |                                    |                                                 |   | 2002                 |            | 2001          |   | Inception)
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |           
|Revenues                            |                       | $                                          |                                   |                                                 |   | $                    |           |               |   | $          | 134,104    |         
|                                   
|                                   
|                                   
|                                   
|Cost of goods sold                  |                       |                                            |                                   |                                                 |   |                      |           |               |   |            | 10,526     |         
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |         
|                                    |                       |                                            |                                    | Gross profit                                    |   |                      |           |               |   |            |           |          |           |             | 123,578     |  
|                                   
|                                   
|                                   
|                                   
|Research and development expenses   |                       |                                            |                                   |                                                 |   |                      |           |               |   |            | 2,521,741  |         
|                                   
|                                   
|                                   
|                                   
|Inventory writedown                 |                       |                                            |                                   |                                                 |   |                      |           |               |   |            | 96,859     |         
|                                   
|                                   
|                                   
|                                   
|Impairment loss                     |                       |                                            |                                   |                                                 |   |                      |           |               |   |            | 9,709      |         
|                                   
|                                   
|                                   
|                                   
|License                             |                       |                                            |                                   |                                                 |   |                      |           |               |   |            | 1,001,500  |         
|                                   
|                                   
|                                   
|                                   
|General and administrative expenses |                       |                                            | 294,362                            |                                                 |   |                      | 85,365     |               |   |            | 9,657,017  |         
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |         
|                                    |                       |                                            |                                    | Operating loss                                  |   |                      | (294,362   | )             |   |            | (85,365    | )        |           |             | (13,163,248 | )
|                                   
|                                   
|                                   
|                                   
|Other income (expense)              |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |         
|                                   
|                                   
|                                   
|                                   
|                                    | Interest income       |                                            |                                    |                                                |   |                      |            |              |   |            |            | 23,406   |          
|                                   
|                                   
|                                   
|                                   
|                                    | Other income          |                                            |                                    |                                                |   |                      |            |              |   |            |            | 268,926  |          
|                                   
|                                   
|                                   
|                                   
|                                    | Interest expense      |                                            |                                    | (22,105                                         | ) |                      |            | (44,185       | ) |            |            | (443,916 | )        
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |         
|                                    |                       |                                            | (22,105                            | )                                               |   |                      | (44,185    | )             |   |            | (151,584   | )       
|                                   
|                                   
|                                   
|                                   
|                                    |                       |                                            |                                    | Loss before income taxes and
extraordinary item |   |                      | (316,467   | )             |   |            | (129,550   | )        |           |             | (13,314,832 | )
|                                   
|                                   
|                                   
|                                   
|                                    |                       |                                            |                                    | Income taxes                                    |   |                      |           |               |   |            |           |          |           |             |            |  
|                                   
|                                   
|                                   
|                                   
|                                    |                       | Forgiveness of debt net of $0 income taxes |                                    |                                                 |  |                      |            |               |  |            |            |          | 1,235,536 |            
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |         
|                                    |                       |                                            | Net loss available to shareholders |                                                 | $ | (316,467             | )          |               | $ | (129,550   | )          |          | $         | (12,079,296 | )          
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |         
|Net loss per share                  |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |         
|                                   
|                                   
|                                   
|                                   
|                                    | Continuing operations |                                            | $                                  | (0.01                                           | ) |                      | $          | (0.00         | ) |            | $          | (0.61    | )        
|                                   
|                                   
|                                   
|                                   
|                                    | Extraordinary item    |                                            |                                    |                                                |   |                      |            |              |   |            |            | 0.06     |          
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |         
|                                    |                       |                                            |                                    | Net loss per share                              |   | $                    | (0.01      | )             |   | $          | (0.00      | )        |           | $           | (0.55       | )
|                                    |                       |                                            |                                    |                                                 |   |                      |            |               |   |            |            |         
|Weighted average shares outstanding |                       |                                            | 34,706,917                         |                                                 |   |                      | 32,075,421 |               |   |            | 21,888,589 |         

See notes to consolidated financial statements

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##### Table of Contents



MEDICAL DISCOVERIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |             |            |            |            |  
|------------------------------------ | -------------------------------------------------------------------------- | ------------------------------------------------------------ | ------------------- | ----------------------------------------- | ------ | -------------------- | -------- | ------------- | ----- | ---------- | ------- | ----------- | ---------- | ---------- | ---------- | -
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |             |            | Cumulative
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |             |            | Amounts   
|                                     |                                                                            |                                                              |                     |                                           |        | For the Three Months |          | Since        
|                                     |                                                                            |                                                              |                     |                                           |        | Ended March 31,      |          | November 20, 
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          | 1991 (Date of
|                                     |                                                                            |                                                              |                     |                                           |        | 2002                 |          | 2001          |       | Inception)
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |           
|Cash flows from operating activities |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |            
|                                    
|                                    
|                                    
|                                    
|                                     | Net loss                                                                   |                                                              | $                   | (316,467                                  | )      |                      | $        | (129,550      | )     |            | $       | (12,867,792 | )         
|                                    
|                                    
|                                    
|                                    
|                                     | Adjustments to reconcile net loss to net
cash used by operating activities |                                                              |                     |                                           |        |                      |          |               |       |            |         |             |           
|                                     |                                                                            | Common stock options issued for services                     |                     |                                           | 84,962 |                      |          |               |      |            |         |             | 2,801,257  |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Common stock issued for services, expenses,
and litigation   |                     |                                           |       |                      |          |               |      |            |         |             | 3,825,585  |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Reduction of escrow receivable from
research and development |                     |                                           |       |                      |          |               |      |            |         |             | 272,700    |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Reduction of legal costs                                     |                     |                                           |       |                      |          |               |      |            |         |             | (130,000   | )         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Notes payable issued for litigation                          |                     |                                           |       |                      |          |               |      |            |         |             | 385,000    |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Depreciation                                                 |                     |                                           | 393    |                      |          |               | 1,329 |            |         |             | 99,985     |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Write-off of subscription receivables                        |                     |                                           |       |                      |          |               |      |            |         |             | 112,500    |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Impairment loss on assets                                    |                     |                                           |       |                      |          |               |      |            |         |             | 9,709      |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Loss on disposal of equipment                                |                     |                                           |       |                      |          |               |      |            |         |             | 30,364     |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Gain on debt restructuring                                   |                     |                                           |       |                      |          |               |      |            |         |             | (1,235,536 | )         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Write-off of receivables                                     |                     |                                           |       |                      |          |               |      |            |         |             | 193,965    |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            | Changes in assets and liabilities                            |                     |                                           |        |                      |          |               |       |            |         |             |            |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            |                                                              | Deferred charges    |                                           |        | 12,076               |          |               |       |           |         |             |            | (96,610    | )         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            |                                                              | Accounts receivable |                                           |        |                     |          |               |       |           |         |             |            | (7,529     | )         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            |                                                              | Inventory           |                                           |        |                     |          |               |       |           |         |             |            |           |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            |                                                              | Other assets        |                                           |        |                     |          |               |       |           |         |             |            |           |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            |                                                              | Accounts payable    |                                           |        | 83,460               |          |               |       | (4,601     | )       |             |            | 1,759,891  |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                            |                                                              | Accrued expenses    |                                           |        | 22,101               |          |               |       | 44,185     |         |             |            | 323,442    |           
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |            
|                                     |                                                                            |                                                              |                     | Net cash used by operating activities     |        |                      | (113,475 | )             |       |            | (88,637 | )           |            |            | (4,523,069 | )
|                                    
|                                    
|                                    
|                                    
|Cash flows from investing activities |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |            
|                                    
|                                    
|                                    
|                                    
|                                     | Purchase of equipment                                                      |                                                              |                     |                                          |        |                      |          |              |       |            |         | (132,184    | )         
|                                    
|                                    
|                                    
|                                    
|                                     | Payments received on note receivable                                       |                                                              |                     |                                          |        |                      |          |              |       |            |         | 130,000     |           
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |            
|                                     |                                                                            |                                                              |                     | Net cash used by investing activities     |        |                      |         |               |       |            |        |             |            |            | (2,184     | )
|                                    
|                                    
|                                    
|                                    
|Cash flows from financing activities |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |            
|                                    
|                                    
|                                    
|                                    
|                                     | Contributed equity                                                         |                                                              |                     |                                          |        |                      |          |              |       |            |         | 131,374     |           
|                                    
|                                    
|                                    
|                                    
|                                     | Issuance of common stock                                                   |                                                              |                     |                                          |        |                      |          |              |       |            |         | 3,354,359   |           
|                                    
|                                    
|                                    
|                                    
|                                     | Payments on notes payable                                                  |                                                              |                     |                                          |        |                      |          | (25,000       | )     |            |         | (206,287    | )         
|                                    
|                                    
|                                    
|                                    
|                                     | Proceeds from notes payable                                                |                                                              |                     |                                          |        |                      |          | 130,000       |       |            |         | 916,613     |           
|                                    
|                                    
|                                    
|                                    
|                                     | Payments on convertible notes payable                                      |                                                              |                     |                                          |        |                      |          |              |       |            |         | (98,500     | )         
|                                    
|                                    
|                                    
|                                    
|                                     | Proceeds from convertible notes payable                                    |                                                              |                     | 105,001                                   |        |                      |          |              |       |            |         | 421,701     |           
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |            
|                                     |                                                                            |                                                              |                     | Net cash provided by financing activities |        |                      | 105,001  |               |       |            | 105,000 |             |            |            | 4,519,260  |  
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |            
|                                     |                                                                            |                                                              |                     | Net increase (decrease) in cash           |        |                      | (8,474   | )             |       |            | 16,363  |             |            |            | (5,993     | )
|                                    
|                                    
|                                    
|                                    
|Cash, beginning of period            |                                                                            |                                                              | 2,481               |                                           |        |                      | 19,781   |               |       |            |        |            
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |            
|                                     |                                                                            |                                                              |                     | Cash, end of period                       |        | $                    | (5,993   | )             |       | $          | 36,144  |             |            | $          | (5,993     | )
|                                     |                                                                            |                                                              |                     |                                           |        |                      |          |               |       |            |         |            

See notes to consolidated financial statements

5



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##### Table of Contents






MEDICAL DISCOVERIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2002

Note 1. Unaudited Interim Financial Statements.

The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments and disclosures
necessary to a fair presentation of these financial statements have been
included. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Companys
2001 Annual
Report on Form 10-KSB for the year ended December 31, 2001, as filed with the
Securities and Exchange Commission. Certain reclassifications and other
corrections for rounding have been made in prior period financial statements to
conform to the current period presentation. The consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All significant inter-company transactions and balances have been
eliminated in consolidation.

Note 2. Going Concern Considerations.

The Companys recurring losses from the Companys development-stage activities
in current and prior years raise substantial doubt about the Companys ability
to continue as a going concern. The financial statements do not include any
adjustments to reflect the possible effects on the recoverability and
classification of assets or amounts and classifications of liabilities that may
result from the possible inability of the Company to continue as a going
concern. The Company is attempting to raise additional capital to sustain
operations. However, there can be no assurance that these plans will be
successful.

Note 3. Commitment Regarding Peregrine Stock.

Peregrine Properties, LLC, a Utah limited liability company (Peregrine), has
entered into an agreement to provide $500,000 to the Company to fund testing
and research steps necessary to continue development of MDI-P. The studies are
funded through an escrow agent. As of December 31, 2000, the Company had
deposited in escrow a single certificate for 5.5 million shares of common stock
for these purposes. Through March 31, 2002, Peregrine had funded
$275,800 to
the escrow, of which $272,700 had been disbursed and recorded as research and
development expense on the financial statements of the Company. The remaining
$227,300 to be expended under the agreement has been recorded on the balance
sheet in equity under the caption escrow receivable. As expenditures are made
from the escrow for research and development, the expenses are recorded on the
books of the Company with a corresponding reduction in the escrow receivable.
Under the original agreement, upon completion of the studies, the escrow agent
was to disburse the 5.5 million shares to Peregrine and to disburse the
research results to the Company. On March 22, 2002, the parties entered into
an agreement the result of which was to partially close the escrow agreement to
the extent of Peregrines funding to date. On that date, 3,143,800 shares were
distributed to Peregrine and all research conducted to date was disbursed to
the Company. Additional research is ongoing, which will be funded by the
remaining commitment from Peregrine.

Note 4. Settlement of Harvest Dispute.

As of November 14, 2001, the Company settled its ongoing dispute with Harvest
Group, L.L.C. (Harvest). The settlement provides for the Company to deliver
to Harvest a non-interest bearing, convertible promissory note (the Note) in
the principal sum of $500,000 due on July 8, 2002 (the Due Date) in full
satisfaction of all current amounts owning on loans from Harvest and all of
Harvests other claims against the Company. Under the terms of the Note,
Harvests only recourse if the Company does not satisfy the Note in full by the
Due Date is to convert the unpaid principal amount to unregistered shares of
common stock of the Company.

Upon the expiration of the Due Date, the principal sum outstanding shall
automatically convert to a number of shares of the Companys common stock equal
to a percentage of the total number of shares then issued and outstanding, on

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a fully-diluted basis (including any unexercised, outstanding stock options or
other rights to acquire stock), as follows:

|                   |  |                              |    |  
|------------------ |  | ---------------------------- | -- | -
|Principal Sum      |  | Percentage of Common        
|Outstanding        |  | Stock Issued and Outstanding
|                   |  |                             
|$1  400,000       |  |                              | 20 | %
|                  
|                  
|                  
|                  
|$400,001  450,000 |  |                              | 25 | %
|                  
|                  
|                  
|                  
|$450,001  500,000 |  |                              | 30 | %

For example, if, as of the Due Date, the Company has 33,000,000 shares of
common stock issued and outstanding, 2,000,000 options outstanding and not yet
exercised, and the principal sum of $410,000 remains unpaid as of the
expiration of the Due Date, the Note will convert to 8,750,000 (.25 x
35,000,000) shares of common stock of the Company. Notwithstanding the
automatic conversion provisions, Harvest may, in its sole and absolute
discretion, suspend the automatic conversion of the Note beyond the Due Date by
providing written notice to the Company of such election no fewer than thirty
(30) days prior to the Due Date. If Harvest suspends the conversion of the
Note, the conversion shall remain suspended indefinitely unless and until
Harvest elects to convert the Note by giving the Company at least thirty (30)
days prior written notice of such election. During any such period of
suspension of the automatic conversion of the Note, the Company may pay the
principal sum due hereunder in whole or in part.

The Note has been recorded under current
liabilities  convertible notes
payable on the balance sheet.

Note 5. Euronet International Advisory Agreement.

On March 26, 2002, the Company entered into an Advisory Agreement with Euronet
International, Inc., a New York City-based business and financial advisory
firm. Under the terms of the agreement, Euronet International will seek to
initiate a private placement of MDI stock to raise up to $10 million. While
details of the private placement have not been finalized, the parties
anticipate a preferred stock offering to accredited investors. The Company
will need to secure shareholder approval to amend its articles of incorporation
before the Company can offer preferred stock. The primary usage of proceeds
from the offering will be to retire debt owing to former joint venture partner
Harvest Group L.L.C., and to pursue an application with the FDA regarding
MDI-P.

The Advisory Agreement has a 12-month term, subject to early termination by the
Company if certain milestones are not satisfied. As of April 25, 2002, Euronet
missed the first milestone. The Company, therefore, has the right to terminate
the Advisory Agreement. However, to date the Company has not terminated the
Advisory Agreement.

Under the Advisory Agreement, Euronet is entitled to the following
compensation: (i) an initial retainer fee of 360,000 shares of common stock of
the Company; (ii) a monthly retainer fee of $6,000 per month for the term of
the agreement; (iii) 4.9% of the issued and outstanding shares of common and
preferred stock (if any) of the Company following the closing of a transaction
generating proceeds to the Company of $1 million or more; (iv) a warrant to
purchase common stock of the company equal to 10% of any investment of $1
million or more, exercisable for 5 years, with an exercise price equal to 120%
of the price paid by investors; (v) 4% of gross proceeds received in the first
year from specified strategic relationships established by Euronet between the
Company and third parties, 2% of which is payable in cash and 2% of which is
payable in common stock warrants exercisable within 3 years with an exercise
price equal to 120% of the market price on the date of issuance.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The purpose of this section is to discuss and analyze the Companys
consolidated financial condition, liquidity and capital resources, and results
of operations. This analysis should be read in conjunction with the financial
statements and notes thereto at pages 2 through 7 and Managements Discussion
and Analysis of Financial Condition and Results of Operations contained in the
Companys Annual Report on Form 10-KSB for the year ended December 31, 2001
(the 2001 10-KSB).

This section contains certain forward-looking statements that involve risks and
uncertainties, including statements regarding the Companys plans, objectives,
goals, strategies and financial performance. The Companys actual results could
differ materially from the results anticipated in these forward-looking
statements as a result of factors set forth under Cautionary Statement for
Forward-Looking Information below and elsewhere in this report.

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Overview

Medical Discoveries, Inc. (the Company or MDI) has developed a product
(hereafter MDI-P) that appears to have the ability to destroy certain
viruses, bacteria and fungi, including the HIV virus. MDI-P may also have the
ability to kill other infectious agents, possibly including pathogenic fungi
and parasites. MDI-P may possibly be used as a sterilizing agent for medical
and dental instruments. MDI-P may also potentially be used to remove or
inactivate infectious agents in human and animal blood-derived products such as
plasma and gamma globulin.

MDI-P is produced by the electrolysis of saline, using a patented instrument
with proprietary electrodes. This solution has a significant oxidation
reduction potential due to a mixture of oxidative products resulting from
electrolysis.

Electrolysis is the method whereby a certain type of electric current is passed
through a chemical solution. The electrical current causes the chemicals in the
saline solution to alter, producing a variety of chemical compounds, such as
ozone and hypochlorous acid. Different electrical currents produce different
concentrations of these and related chemicals. In published scientific
literature, electrolyzed saline solutions have been shown to have an intense
anti-microbicidal effect.

The Company is committed to its pursuit of establishing MDI-P as an effective
anti-bacterial, anti-viral and anti-fungal pharmaceutical for in-vitro and
in-vivo applications and to developing MDI-P as an effective liquid chemical
sterilant for a variety of applications.

MDI is a development stage company. To date, the Company has not generated
significant revenues from operations or realized a profit. The Company is
presently investing all of its resources in the testing, development and
commercialization of MDI-P and its other technologies. The Company is
attempting to raise additional funding to continue development of its
technologies and to submit its technologies to appropriate regulatory agencies
to secure approvals when required for the marketing and use of its products.

Recent Events

Euronet International Advisory Agreement. On March 26, 2002, the Company
entered into an Advisory Agreement with Euronet International, Inc., a New York
City-based business and financial advisory firm. Under the terms of the
agreement, Euronet International will seek to initiate a private placement of
MDI stock to raise up to $10 million. While details of the private placement
have not been finalized, the parties anticipate a preferred stock offering to
accredited investors. The Company will need to secure shareholder approval to
amend its articles of incorporation before the Company can offer preferred
stock. The primary usage of proceeds from the offering will be to retire debt
owing to former joint venture partner Harvest Group L.L.C., and to pursue an
application with the FDA regarding MDI-P. The Advisory Agreement is attached
as Exhibit 10.3.

Favorable Toxicity Test Results. In January, 2002, the Company received the
results of toxicity tests, completed in 2001 by WIL Research Laboratories,
demonstrating that MDI-P produced no systemic toxicity in laboratory animal
tests used to assess potential problems for human application. These studies
were conducted following FDA guidelines and have helped establish that MDI-P is
reasonably safe for human phase I and phase II clinical trials.

Results of Operations

Revenues and Gross Profit. The Company booked no revenue for the quarter ended
March 31, 2002, nor was any revenue booked for the quarter ended March 31,
2001. The Company does not anticipate booking significant revenues in the near
future as it continues to focus on getting products to market.

Operating Expenses and Operating Loss. The Company did not spend any funds on
research and development for the quarter ended March 31, 2002, nor were any
such funds expended during the same quarter of 2001. The Companys general and
administrative expenses were $294,362 during the first quarter of 2002, as
compared to $85,365 during the quarter ended March 31, 2001. This increase was
due primarily to an expense associated with stock options granted to the
Companys CEO. As a result of the foregoing, the Company sustained an
operating loss

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of $294,362 for the quarter ended March 31, 2002, as compared with an operating
loss of $85,365 for the same period of 2001.

Other Income/Expense and Net Loss. The Company incurred interest expenses of
$22,105 for the quarter ended March 31, 2002, as compared with $44,185 in such
expenses for the same period of 2001. The decrease in interest expense
reflects the election by several of the Companys noteholders to convert their
notes to common stock of the Company. In sum, the Companys net loss for the
first quarter of 2002 was $316,467 or a loss of less than $0.01 per fully
diluted share. For the quarter ended March 31, 2001, the Company sustained a
net loss of $129,550, also a loss of less than $0.01 per fully diluted share.

Future Expectations.Management expects the Company will operate at a loss for
several more years while it continues to study, gain regulatory approval of and
commercialize its technologies. If the Company is successful in raising
additional capital, the Company will likely spend more during the remainder of
2002 in research and development and general and administrative expenses, and
thereby sustain greater resulting losses, than it has in recent years.

Liquidity and Capital Resources

The Company will require significant additional funding to continue to develop,
research and seek regulatory approval of its technologies. In addition, the
Company cannot survive, even in the near term, without immediate additional
funding for operations. The Company does not currently generate any cash from
operations and has no credit facilities in place or available. Currently, the
Company is funding operations through short-term loans from shareholders and
others.

Management is seeking to raise substantial additional funds in private stock
offerings in order to meet its near-term and long-term funding requirements.
While management is optimistic that it can raise such funds, the Company has
not always been successful in doing so in recent years. Given that the Company
is still in an early development stage and does not have revenues from
operations, raising equity financing is difficult. In addition, any additional
equity financing will have a substantial dilutive effect to the Companys
current shareholders.

Cautionary Statement for Forward Looking Information

Certain information set forth in this report contains forward-looking
statements within the meaning of federal securities laws. Forward looking
statements include statements concerning plans, objectives, goals, strategies,
future events, future revenues or performance, capital expenditures, and
financing needs of the Company and other information that is not historical
information. When used in this report, the words estimates, expects,
anticipates, forecasts, plans, intends, believes and variations of
such words or similar expressions are intended to identify forward-looking
statements. Additional forward-looking statements may be made by the Company
from time to time. All such subsequent forward-looking statements, whether
written or oral and whether made by or on behalf of the Company, are also
expressly qualified by these cautionary statements.

The Companys forward-looking statements are based upon the Companys current
expectations and various assumptions. The Companys expectations, beliefs and
projections are expressed in good faith and are believed by the Company to have
a reasonable basis, including without limitation, managements examination of
historical operating trends, data contained in the Companys records and other
data available from third parties, but there can be no assurance that
managements expectations, beliefs and projections will result or be achieved
or accomplished. The Companys forward-looking statements apply only as of the
date made. The Company undertakes no obligation to publicly update or revise
forward-looking statements which may be made to reflect events or circumstances
after the date made or to reflect the occurrence of unanticipated events.

There are a number of risks and uncertainties that could cause actual results
to differ materially from those set forth in, contemplated by or underlying the
forward-looking statements contained in this report. Those risks and
uncertainties include, but are not limited to, our lack of significant
operating revenue to date, our need for substantial and immediate additional
capital, the fact that we may dilute existing shareholders through additional
stock issuances, the extensive governmental regulation to which we are subject,
the fact that our technologies remain unproven, the intense competition we face
from other companies and other products, and our reliance upon potentially
inadequate intellectual property. Those risks and certain other uncertainties
are discussed in more detail in the 2001 10-KSB. There may also be other
factors, including those discussed elsewhere in this report, that may

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cause the Companys actual results to differ from the forward-looking
statements. Any forward-looking statements made by or on behalf of the Company
should be considered in light of these factors.




PART II
OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

None.




ITEM 2. CHANGES IN SECURITIES



|(c) |  | The Company sold the following securities since December 31, 2001:
|--- |  | ------------------------------------------------------------------

(i) $50,000 convertible promissory note dated February 8, 2002,
convertible to common stock of the Company at the rate of $0.125 per share.

(ii) $55,000 convertible promissory note dated February 22, 2002,
convertible to common stock of the Company at the rate of $0.125 per share.

(iii) $50,000 convertible promissory note dated April 8, 2002, convertible
to common stock of the Company at the rate of $0.125 per share.

(iv) $50,000 convertible promissory note dated April 21, 2002, convertible
to common stock of the Company at the rate of $0.125 per share.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The following documents are furnished as exhibits to this Form 10-KSB. Exhibits
marked with an asterisk are filed herewith. The remainder of the exhibits
previously have been filed with the Commission and are incorporated herein by
reference.

|       |  |                                                                                                                                                                                                                                                                                                                       
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NUMBER |  | EXHIBIT                                                                                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                       
|3.1    |  | Amended and Restated Articles of Incorporation of the Company
(filed as Exhibit 3.1 to the Companys Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994, and
incorporated herein by reference).                                                                                                 
|      
|      
|      
|      
|       |  |                                                                                                                                                                                                                                                                                                                       
|      
|      
|      
|      
|3.2    |  | Amended Bylaws of the Company (filed as Exhibit 3.2 to the
Companys Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994, and incorporated herein by reference).                                                                                                                                 
|      
|      
|      
|      
|       |  |                                                                                                                                                                                                                                                                                                                       
|      
|      
|      
|      
|10.1   |  | JV Agreement dated as of June 28, 2000, among Medical Discoveries,
Inc., Harvest Group, L.L.C. and Hydromedics, Inc. (f/k/a Advanced
Sales Company, Inc.) (filed as Exhibit 10.1 to the Companys
Quarterly Report on Form 10-QSB for the quarter ended September
30, 2000, and incorporated herein by reference).    
|      
|      
|      
|      
|       |  |                                                                                                                                                                                                                                                                                                                       
|      
|      
|      
|      
|10.2   |  | Mutual Release and Settlement Agreement dated as of November 29,
2001, among Medical Discoveries, Inc., Harvest Group, L.L.C. and
Hydromedics, Inc. (f/k/a Advanced Sales Company, Inc.) (filed as
Exhibit 10 to the Companys Current Report on Form 8-K on December
15, 2000, and incorporated herein by reference).
|      
|      
|      
|      
|       |  |                                                                                                                                                                                                                                                                                                                       
|      
|      
|      
|      
|10.3   |  | Advisory Agreement dated as of March 26, 2002, between Medical
Discoveries, Inc. and Euronet International, Inc. (filed as
Exhibit 10.3 to the Companys Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2001, and incorporated herein by
reference).                                             
|      
|      
|      
|      
|       |  |                                                                                                                                                                                                                                                                                                                       
|      
|      
|      
|      
|16.1   |  | Letter from Tanner + Co. dated December 15, 2000 (filed as Exhibit
99 to the Companys Current Report on Form 8-K on December 15,
2000, and incorporated herein by reference).                                                                                                                                        

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|       |  |                                                                                                                                                                             
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NUMBER |  | EXHIBIT                                                                                                                                                                     
|       |  |                                                                                                                                                                             
|      
|      
|      
|      
|16.2   |  | Letter from Tanner + Co. dated January 4, 2001 (filed as Exhibit
16 to the Companys Current Report on Form 8-K/A on January 4,
2001, and incorporated herein by reference).

(b)  Reports on Form 8-K.

The Company filed no reports on Form 8-K during the quarter ended March 31,
2002. However, subsequent to quarter-end, on April 15, 2002, the Company filed
a Form 8-K disclosing a press release that was released on April 15, 2002
concerning future Company goals.




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.
|                     
|                     
|                     
|                     
|                      |  |                          
|                     
|                     
|                     
|                     
|                      |  |                          
|                     
|                     
|                     
|                     
|                      |  | /S/ JUDY M. ROBINETT     
|                     
|                     
|                     
|                     
|                      |  |                          
|                     
|                     
|                     
|                     
|                      |  | Judy M. Robinett         
|                     
|                     
|                     
|                     
|                      |  | Chief Executive Officer  
|                     
|                     
|                     
|                     
|                      |  |                          
|                     
|                     
|                     
|                     
|                      |  |                          
|                     
|                     
|                     
|                     
|Date:    May 15, 2002 |  |                          

11