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

                                FORM 10-QSB

(Mark One)

 X    Quarterly report under Section 13 or 15(d) of the Securities
===   Exchange Act of 1934

          For the quarterly period ended        June 30, 1998
                                               ----------------

      Transition report under Section 13 or 15(d) of the Securities
===   Exchange Act of 1934

          For the transition period from _____________ to ______________

     Commission File Number: 0-12627
                             -------

                            MEDICAL DISCOVERIES, INC.
   -------------------------------------------------------------------------
       (Exact Name of Small Business Issuer as Specified in Its Charter)

            Utah                                87-0407858
   -------------------------------------------------------------------------
   (State or other jurisdiction        (I.R.S. Employer Identification No.)
   of incorporation or organization)


                 2985 North 935 East, Suite 9, Layton, UT 84041
    -------------------------------------------------------------------------
                    (Address of principal executive offices)


                                 (801) 771-0523
    -----------------------------------------------------------------------
                           (Issuer's Telephone Number)

                                       N/A
    -----------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

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

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


     Check whether the registrant  has filed all documents and reports  required
to be  filed  by  Sections  12,  13,  or 15(d) of the  Exchange  Act  after  the
distribution of securities under a plan confirmed by a court.
                                                           Yes     No
                                                        ===     ===
                APPLICABLE ONLY TO CORPORATE ISSUERS


     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date:   as of July 31, 1998
                                                    -------------------

     Transitional Small Business Disclosure Format (check one)

                                                           Yes   X No
                                                        ===     ===
<PAGE>
                            PART I
                    FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

The following financial statements are filed with this report:

     Balance Sheets as of June 30, 1998 (unaudited) and December 31, 1997
     (unaudited)

     Statements of Operations  for the  Three-Month  Periods ended June 30, 1998
     (unaudited) and June 30, 1997  (unaudited) and the Six-Month  Periods ended
     June 30, 1998  (unaudited)  and June 30, 1997 and since  inception  through
     June 30, 1997 (unaudited).

     Statements  of Cash Flows for the  Six-Month  Periods  ended June 30,  1998
     (unaudited)  and June 30, 1997  (unaudited)  Notes to  Unaudited  Financial
     Statements

<PAGE>

                            MEDICAL DISCOVERIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET
                    AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
                                   (UNAUDITED)

                                       June 30, 1998       December 31, 1997
                                      --------------      ------------------
CURRENT ASSETS
        Cash                            $  205,949              $      765
        Accounts receivable                 11,477                  30,585
        Inventory                            6,750                       0
        Prepaid expenses                     2,715                  10,869
                                        -----------             -----------
          Total Current Assets             226,891                  42,219

PROPERTY AND EQUIPMENT
        Equipment                           76,304                  72,304
        Less: Accumulated depreciation     (31,027)                (23,507)
                                        -----------             -----------
          Net Property and Equipment        45,277                  48,797

OTHER ASSETS
        Investment in Regenere, Inc.        75,000                       0
        Deposits                             2,220                   3,160

Total Assets                            $  349,388              $   94,176
                                        ===========             ===========
CURRENT LIABILITIES
     Accounts payable                   $1,107,679              $  916,734
     Accrued interest                       20,271                  14,360
     Current maturities of:
        Notes payable                      101,000                 102,591
        Convertible notes payable          291,700                 291,700
                                         ----------             -----------
          Total Current Liabilities      1,520,650               1,325,385

STOCKHOLDERS' EQUITY
     Common Stock, no par value,
        authorized 100,000,000           6,938,997               6,507,317
        shares; 23,240,567 shares
        issued and outstanding at
        June 30, 1998
     Retained deficit                   (7,997,759)             (7,626,026)
     Subscription receivables             (112,500)               (112,500)
                                        -----------             -----------
     Total Stockholders' Equity         (1,171,262)             (1,231,209)
                                        -----------             -----------

TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                 $  349,388              $   94,176
                                        ===========             ===========


<PAGE>


<TABLE>

                            MEDICAL DISCOVERIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF OPERATIONS
              FOR THE PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1997
                                   (UNAUDITED)

<S>                         <C>               <C>          <C>               <C>           <C>    

                                                                                              Cumulative
                              For the three months             For the six months          Amounts since
                                 ended June 30,                  ended June 30,             November 20,
                            ------------------------------   -----------------------------   1991 (date of
                                  1998               1997          1998              1997       inception)
                            -----------        -----------   -----------       -----------   -------------
REVENUE
  Product sales             $   10,574         $        0    $   12,847        $        0    $     12,847
  Clinical fees                      0                  0             0                 0         108,200
  Interest                         432                  0         1,158                 0          22,049
                            -----------        -----------   -----------       -----------   -------------
    Total Revenue               11,006                  0        14,005                 0         143,096

COST OF GOODS SOLD               3,750                  0         5,000                 0           5,000
                            -----------        -----------   -----------       -----------   -------------
GROSS MARGIN                     7,256                  0         9,005                 0         138,096

EXPENSES
  License                            0                  0             0                 0       1,001,500
  Research and development      71,662             29,363       145,487            29,664       2,002,363
  General and administrative    96,109             57,037       209,032           218,721       4,798,489
                            -----------        -----------   -----------       -----------   -------------
     Total Expenses            167,771             86,400       354,519           248,385       7,802,352
                            -----------        -----------   -----------       -----------   -------------
NET LOSS FROM OPERATIONS      (160,515)          (187,488)     (345,514)         (248,385)     (7,664,256)

OTHER INCOME / (EXPENSE)        12,051            (19,703)       26,219           (31,230)        117,024
                            -----------        -----------   -----------       -----------   -------------

LOSS BEFORE INCOME TAXES      (172,566)          (106,103)     (371,733)         (279,615)     (7,547,232)
  AND EXTRAORDINARY ITEM

INCOME TAXES                         0                  0             0                 0               0
                            -----------        -----------   -----------       -----------   -------------
LOSS BEFORE EXTRAORDINARY     (172,566)          (106,103)     (371,733)         (279,615)     (7,547,232)
  ITEM

FORGIVENESS OF DEBT                  0                  0             0                 0       1,235,536
                            -----------        -----------   -----------       -----------   -------------
NET INCOME                  $ (172,566)        $ (106,103)   $ (371,733)       $ (279,615)   $ (6,311,696)
                            ===========        ===========   ===========       ===========   =============

INCOME / (LOSS) PER SHARE
  Loss from continuing
  operations                $    (0.01)        $    (0.00)   $    (0.02)       $    (0.01)   $      (0.42)
  Gain from debt
  forgiveness                     0.00               0.00          0.00              0.00            0.07
                            -----------        -----------   -----------       -----------   -------------
  Income / (loss) per
  share                     $    (0.01)        $    (0.00)   $    (0.02)       $    (0.01)   $      (0.35)
                            ===========        ===========   ===========       ===========   =============

WEIGHTED AVERAGE NUMBER
  OF SHARES                  23,577,472         21,879,944    23,376,004        21,778,359      17,963,338
                            ===========        ===========   ===========       ===========   =============

</TABLE>
<PAGE>
                            MEDICAL DISCOVERIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF CASH FLOWS
              FOR THE PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1997
                                   (UNAUDITED)

                                                                  Cumulative
                                    For the three months         Amounts since
                                      ended June 30,              November 20,
                                   --------------------------    1991 (date of
                                        1998         1997          inception)
                                   ------------   -----------    -------------
OPERATING ACTIVITIES
  Net income (loss) for the
    period                         $  (371,733)   $ (279,615)    $ (6,598,182)
  Add non-cash items
    Common stock issued for
      services and license                   0             0        3,419,236
    Reduction of legal costs                 0             0         (130,000)
    Depreciation                         7,520         7,628           32,489
    Loss on disposal of equipment            0             0           30,364
    Gain on debt restructuring               0             0       (1,235,536)
    Write-off receivables                    0             0          193,965
    Decrease (increase) in:
      Receivables                       19,109        22,485           11,580
      Inventory                         (6,750)            0           (6,750)
      Prepaid Expenses                   8,154         8,088           (2,715)
      Other assets                         940        (1,090)          (2,220)
    Increase (decrease) in:
      Accounts payable                 190,945       112,386          951,770
      Accrued expenses                   5,911       (16,066)          41,752
                                    -----------   -----------    -------------
Net Cash from Operations              (145,904)     (145,824)      (3,294,250)

INVESTING ACTIVITIES
  Purchases of equipment                (4,000)       (5,082)         (99,967)
  Payments received on note
    receivable                               0             0           99,414
  Investment in Regenere               (75,000)            0           75,000
                                    -----------   -----------    -------------
Net Cash from Investing Activities     (79,000)       (5,082)         (75,553)

FINANCING ACTIVITIES
  Increase in notes payable                  0             0          101,000
  Payment of notes payable              (1,591)       (1,385)          (8,161)
  Increase in notes payable                  0             0          316,700
  Equity contributed                         0             0          131,374
  Proceeds from issuance of
     common stock                      431,680       147,500        3,034,839
                                    -----------   -----------    -------------
    Net Cash from Financing
      Activities                       430,089       146,115        3,575,752
                                    -----------   -----------    -------------
NET INCREASE / (DECREASE) IN CASH      205,185        (4,791)         205,949

CASH, BEGINNING PERIOD                     764        25,306                0
                                    -----------   -----------    -------------
CASH ENDING PERIOD                  $  205,949    $   20,515     $    205,949
                                    ===========   ===========    =============
<PAGE>
                            MEDICAL DISCOVERIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 1998

NOTES TO UNAUDITED FINANCIAL STATEMENTS


The unaudited financial  statements include the accounts of Medical Discoveries,
Inc.  and include  all  adjustments  which are,  in the  opinion of  management,
necessary to present  fairly the financial  position as of June 30, 1998 and the
results of  operations  and changes in financial  position  for the  three-month
period ended June 30, 1998. The results of operations for the three months ended
June 30, 1998 are not  necessarily  indicative of the results to be expected for
the entire year.


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

OPERATIONS AND LIQUIDITY.

MDI had booked  revenue of $12,847 for the period  from  January 1, 1998 to June
30, 1998 compared to no revenue for the same period in 1997. The revenue results
from initial  sales of imported  functional  water  machines.  The company spent
$145,487 in research and  development  costs during the first six months of 1998
compared  to $29,664 for the same period in last year.  The  increased  spending
reflects the  additional  testing the Company is conducting on MDI-P to progress
the FDA application process. MDI reduced its General and Administrative  expense
by 4 percent to $209,032  from  $218,721.  Funding for  on-going  operations  is
discussed in the "Additional Funding is Required" section below. The company has
established a "consumer  products" division (MDI HealthCare  Systems) as part of
its  strategy  of  developing  certain  aspects  of its  core  technologies  for
commercialization.

DEVELOPMENT OF NEW/IMPROVED TECHNOLOGY

During the last  quarter,  the Company has  continued  to focus its research and
development  activities to further enhancing its core technologies.  Chief among
these  efforts  (which  are  in  the  process  of  patent  applications)  is the
capability of developing a new  generation  of consumer  products  utilizing its
"e1ectrclyzed  saline water".  These  variations of the Company's  patented core
technologies  and  resultant  commercially  viable  products  better  enable the
Company to aggressively pursue markets outside of its traditional pharmaceutical
research and development operations. Included among these new target markets are
applications;  in the newly evolving skin care  "Cosmeceuticals  (tm)" industry,
home water purification, and bottled waters.

These markets represent  significant revenue opportunities in the near term, and
the  Company  is  presently   developing  the  appropriate   infrastructure   to
aggressively pursue this business.

The  Company  remains  committed  to its  pursuit  of  establishing  MDI-P as an
effective  compound targeted against the HIV/AIDS virus,  developing MDI-P as an
effective anti-bacterial, and anti-fungal pharmaceutical, and other applications
such as the sterilization of surgical and dental instruments.

FORMATION OF A NEW CONSUMER PRODUCTS DIVISION

MDI has established a new operating division: MDI HealthCare Systems, focused on
the commercialization of products targeted at the health and wellness, cosmetic,
home  water-purification  systems and bottled water markets.  The products being
marketed by this new division  will be a  combination  of  proprietary  products
internally  developed as well as unique products sourced from strategic partners
located in the United States and certain international markets. The focus of MDI
HealthCare Systems will be the marketing and sales of water purification systems
targeted  at  the  home,   food  industry  and  industrial   applications.   The
electrolysis  based Ionizer  systems are sourced under  agreements  with various
manufacturers in Japan and Korea.

This   is   a   first   stage   in   a   plan   to   eventually   establish   an
assembly/manufacturing operation within the United States in the area of product
development, manufacturing, and after sales service.

JOINT VENTURE.

MDI has completed a joint  venture  agreement  with  Advanced  Bio-Technologies,
Inc., a privately held company  specializing in the research,  development,  and
commercialization of proprietary  products in the wound treatment,  scar therapy
and skin care  industry.  The new  company,  Regenere,  Inc.  ("Regenere"),  was
established on July 6, 1998 as a  Cosmeceuticals  health care company focused on
the identification,  exploration,  validation, development and commercialization
of  innovative  solutions  for scar therapy,  wound  healing,  and skin care and
repair.

Medical  Discoveries,  Inc. owns a 50% interest in Regenere.  Lee F. Kulas,  MDI
President  and CEO has  been  named a  Director  and  Chairman  of the  Board of
Regenere.  Mr.  Alvin  Zidell,  also a  Director  of MDI,  has also been named a
Director of Regenere.

EXCLUSIVE DISTRIBUTION AGREEMENT AWARDED TO MDI

On  July  31,  1998,  Medical  Discoveries,   Inc.  entered  into  an  exclusive
distribution  agreement  with  Hattori  Seshi  Company for  distribution  of its
products in the following markets:  United States, Europe, South America, India,
and Canada.

Hattori  Seshi  Company,  located in Japan,  is a  proprietary  manufacturer  of
certain  cosmetic and skin care products  targeted at the scar therapy and wound
healing  markets.  These  products  will play an integral  role in the new joint
venture, Regenere, as well as MDI HealthCare System division.

In  addition,  both  MDI and  Hatori  Seshi  have  initiated  joint  development
activities  using the  combined  proprietary  technologies  of each  company  in
developing a new generation of products aimed at the Cosmeceuticals markets.

MANAGEMENT ADDITIONS

Scott Wood was named to the position of Chief  Financial  Officer and will serve
as an Officer of the Corporation.  Mr. Wood has extensive experience in emerging
companies and has a background in  distribution,  manufacturing,  and technology
development.

PATENT ACTIVITY

The Company has announced  the filing of a new patent in Japan  covering a broad
range of claims for its core technologies. The Company will file similar patents
in the USA in the near future.

JAPANESE MARKET OPPORTUNITES AND ANALYSIS.

MDI is continuing discussions regarding licensing and other business development
relationships with several Japanese and Korean companies.

There  continues  to be strong  interest  in the medical  pharmaceutical  market
applications of the Company's  proprietary  compound,  MDI-P for applications in
Japanese  and  other  foreign  markets.  MDI is  actively  discussing  potential
alliances  with several of these  companies to jointly  collaborate in this area
using the Company's  patented  technologies and drawing on its experience in thc
medical area with its Scientific Advisory Board

FUNDING

In June 1998,  the Company  raised  $300,000 in exchange  for 400,000  shares of
common stock at a price of $0.75 per share,  warrants to purchase 800,000 shares
of stock at prices ranging from $0.75 to $1.50 per share, and certain  exclusive
limited  distribution  rights for the Company's own products as well as products
from Regenere. A private financial group consisting of USA-based medical doctors
representing a variety of specialties  provided the funding.  Upon completion of
the entire funding package  contemplated by the funding  arrangement,  MDI would
raise up to $3.5 million from the private  financial  group.  In connection with
this funding, MDI will receive additional investment consulting services from an
investment  banking  concern in exchange  for 120,000  warrants to purchase  the
Company's common stock at $0.001 per share, and 500,000 warrants to purchase the
Company's common stock at prices ranging from $0.50 to $0.75 per share. The bulk
of this funding will be spent on validation  testing  required for submission to
the FDA of an  Investigational  New Drug  application  (IND) for MDI-P  targeted
against the HIV/AIDS virus.

Additionally,  the  Company is  continuing  a rigorous  approach  in each of its
research  and  testing  programs  that  continue to show  promise  and  generate
valuable scientific data for eventual FDA approvals submission.

ADDITIONAL  FUNDING  IS  REQUIRED.   Management  intends  to  raise  substantial
additional  funds in private stock offerings in the near future in order to meet
its near-term  funding  requirements  with a special  emphasis in Japan.  In the
future, management anticipates the need to raise substantial additional bands in
public stock  offerings as well.  As  additional  funds are raised,  the Company
intends to commence paying salaries to its officers. The Company also intends at
that time to hire additional technical and administrative personnel.

<PAGE>
                             PART II
                         OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is not currently  involved in any  litigation  and there has been no
change in any with regard to any potential legal dispute since the filing of the
Company's 10KSB for the year ended December 31, 1997.


ITEM 2.  CHANGES IN SECURITIES

     N/A


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     N/A


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     N/A


ITEM 5.  OTHER INFORMATION

     N/A

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)     Exhibits required by Item 601 of Regulation S-B.

     The following are exhibits to this Form 10-QSB.

EXHIBIT NUMBER     DESCRIPTION
--------------     -----------

27                 Financial Data Schedule.

     (b)  Reports on Form 8-K

          N/A
<PAGE>
SIGNATURES

     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                       MEDICAL DISCOVERIES, INC.



Date: August 13, 1998                  /s/ Lee F. Kulas
                                       ---------------------------
                                       President and Chief Executive Officer