UNITED
      STATES




**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**










**FORM
      10-QSB**





(MARK
      ONE)





x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESAND
                EXCHANGE ACT OF 1934





FOR
      THE
      QUARTERLY PERIOD ENDED March 31, 2007





OR





o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                AND EXCHANGE ACT OF 1934





COMMISSION
      FILE NUMBER: 0-12627










**MEDICAL
      DISCOVERIES, INC.**


(Exact
      name of registrant as specified in its charter)





**Utah**
            
            **87-0407858**(State
                or other jurisdiction of incorporation organization)
            
            (IRS
                Employer Identification No.)





**6033
                W. Century Blvd, Suite 1090,**
              **Los
                Angeles, California**
            
            **90045**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(310)
      670-7911**


(Registrant's
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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
oNo
x.





Indicate
      the number of shares outstanding of each of the registrant's classes of common
      stock, as of the latest practicable date:




As
      of
      December 11, 2007, the issuer had 197,676,560 shares of common stock
      outstanding, which includes 22,837,593 shares of common stock currently held
      in
      escrow.





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act):


Yes
oNo
x





Transitional
      Small Business Disclosure Format: Yes oNo x














**MEDICAL
      DISCOVERIES, INC.**


**For
      the quarter ended March 31, 2007**


**FORM
      10-QSB**





**TABLE
      OF CONTENTS**


**PART
                  I**ITEM
                  1.
              
              
              FINANCIAL
                  STATEMENTS
              
              
              1ITEM
                  2.
              
              
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              
              
              15ITEM
                  3.
              
              
              CONTROLS
                  AND PROCEDURES
              
              
              27**PART
                  II**ITEM
                  1.
              
              
              LEGAL
                  PROCEEDINGS
              
              
              28ITEM
                  2.
              
              
              UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
              
              
              28ITEM
                  3.
              
              
              DEFAULTS
                  UPON SENIOR SECURITIES
              
              
              28ITEM
                  4.
              
              
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              
              
              29ITEM
                  5.
              
              
              OTHER
                  INFORMATION
              
              
              29ITEM
                  6.
              
              
              EXHIBITS
              
              
              29









**PART
      I**




**ITEM
      1.**  **FINANCIAL
      STATEMENTS** .




**MEDICAL
                DISCOVERIES, INC. AND SUBSIDIARIES****(A
                Development Stage Company)****CONDENSED
                CONSOLIDATED BALANCE SHEETS****(Unaudited)**




**March
                31,**
            
            **December
                31,****2007**
            
            **2006****ASSETS****CURRENT
                ASSETS**Cash
            
            
            
            
            $
            137,385
            
            $
            47,658**Total
                Current Assets**
            
            
            
            
            
            137,385
            
            
            47,658**Property
                and Equipment, net**
            
            
            
            
            
            733
            
            
            789**Assets
                held for sale**
            
            
            
            
            
            57,059
            
            
            61,460**TOTAL
                ASSETS**
            
            
            
            
            $
            195,177
            
            $
            109,907**LIABILITIES
                AND STOCKHOLDERS' DEFICIT****CURRENT
                LIABILITIES**Accounts
                payable
            
            
            
            
            $
            711,621
            
            $
            663,691Accrued
                payroll and payroll taxes
            
            1,244,848
            
            
            1,184,264Accrued
                interest payable
            
            
            
            
            
            275,112
            
            
            267,739Notes
                payable to shareholders
            
            
            
            
            
            56,000
            
            
            56,000Convertible
                notes payable
            
            
            
            
            
            193,200
            
            
            193,200Financial
                instrument
            
            
            
            
            
            100,969
            
            
            294,988Current
                liabilities associated with assets held for sale
            
            2,959,903
            
            
            2,914,438**Total
                Current Liabilities**
            
            
            
            
            
            5,541,653
            
            
            5,574,320**LONG-TERM
                LIABILITY**
            
            
            
            
            
            90,000
            
            
            90,000**TOTAL
                LIABILITIES**
            
            
            
            
            
            5,631,653
            
            
            5,664,320**STOCKHOLDERS'
                DEFICIT**Preferred
                stock - undesignated, Series A, convertible; no par value;50,000,000
                shares authorized; 34,420 shares issued and outstanding;(aggregate
                liquidation preference of $3,442,000); the Company alsohas
                designated a Series B with no shares issued or outstanding
            
            514,612
            
            
            514,612Common
                stock, no par value; 250,000,000 shares authorized;118,357,704
                shares issued and outstanding
            
            15,299,017
            
            
            15,299,017Additional
                paid-in capital
            
            
            
            
            
            1,348,020
            
            
            1,056,020Deficit
                accumulated prior to the development stage
            
            (1,399,577
            )
            
            (1,399,577
            )Deficit
                accumulated during the development stage
            
            (21,198,548
            )
            
            (21,024,485
            )**Total
                Stockholders' Deficit**
            
            
            
            
            
            (5,436,476
            )
            
            (5,554,413
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' DEFICIT**
            $
            195,177
            
            $
            109,907




The
                accompanying notes are an integral part of these condensed consolidated
                financial statements




1


**MEDICAL
                DISCLOVERIES, INC. AND SUBSIDIARIES**
              **(A
                Development Stage Company)**
              **CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS**
              **(Unaudited)**




**For
                  the Three Months****Ended**
                **March
                  31,**
              
              **From
                    Inception of the Development Stage on**
                  **November
                    20, 1991****through**
                  **March
                    31,****2007**
              
              **2006**
              
              **2007**Operating
                  ExpensesGeneral
                  and administrative
              
              $
              251,327
              
              $
              89,835
              
              $
              5,202,000Loss
                  from Operations
              
              
              (251,327
              )
              
              (89,835
              )
              
              (5,202,000
              )Other
                  Income (Expenses)Unrealized
                  gain (loss) on financial instrument
              
              
              194,019
              
              
              (1,119,777
              )
              
              5,058,818Interest
                  income
              
              
              148
              
              
              1,211
              
              
              58,312Interest
                  expense
              
              
              (7,740
              )
              
              (7,372
              )
              
              (1,193,360
              )Gain
                  on debt restructuring
              
              
              -
              
              
              -
              
              
              2,039,650Other
                  income
              
              
              -
              
              
              -
              
              
              906,485Total
                  Other Income (Expenses)
              
              
              186,427
              
              
              (1,125,938
              )
              
              6,869,905Income
                  (Loss) from Continuing Operations
              
              
              (64,900
              )
              
              (1,215,773
              )
              
              1,667,905Loss
                  from Discontinued Operations
              
              
              (109,163
              )
              
              (355,693
              )
              
              (22,174,254
              )Net
                  Loss
              
              
              (174,063
              )
              
              (1,571,466
              )
              
              (20,506,349
              )Preferred
                  stock dividend from beneficialconversion
                  feature
              
              
              -
              
              
              -
              
              
              (692,199
              )Net
                  Loss Applicable to Common Shareholders
              
              
              (174,063
              )
              
              (1,571,466
              )
              
              (21,198,548
              )Basic
                  and Diluted Loss per Common Share:Loss
                  from Continuing Operations
              
              $
              (0.000
              )
              $
              (0.011
              )Loss
                  from Discontinued Operations
              
              $
              (0.001
              )
              $
              (0.004
              )Net
                  loss
              
              $
              (0.001
              )
              $
              (0.015
              )Basic
                  and Diluted Weighted-Average CommonShares
                  Outstanding
              
              
              118,357,704
              
              
              107,895,212


The
      accompanying notes are an integral part of these condensed consolidated
      financial statements




2


**MEDICAL
                  DISCOVERIES, INC. AND SUBSIDIARIES**
                **(A
                  Development Stage Company)**
                **CONDENSED
                  CONSOLIDATED STATEMENTS OF CASH FLOWS**
                **(Unaudited)**
 
 **For
                  the Three Months****Ended**
                **March
                  31,**
              
              **From
                      Inception of the Development Stage on**
                    **November
                      20, 1991****through**
                    **March
                      31,****2007**
              
              **2006**
              
              **2007****Cash
                  Flows From Operating Activities**Net
                  loss
              
              $
              (174,063
              )
              $
              (1,571,466
              )
              $
              (20,506,349
              )Adjustments
                  to reconcile net loss to net cash provided by(used
                  in) operating activitiesForeign
                  currency transaction loss
              
              
              34,058
              
              
              7,425
              
              
              95,079Gain
                  on debt restructuring
              
              
              -
              
              
              -
              
              
              (2,039,650
              )Common
                  stock issued for services, expenses, and litigation
              
              
              -
              
              
              -
              
              
              4,267,717Commitment
                  for research and development obligation
              
              
              -
              
              
              -
              
              
              2,378,445Depreciation
              
              
              4,457
              
              
              5,014
              
              
              131,629Reduction
                  of escrow receivable from research and development
              
              
              -
              
              
              -
              
              
              272,700Unrealized
                  gain (loss) on financial instrument
              
              
              (194,019
              )
              
              1,119,777
              
              
              (5,058,818
              )Stock
                  options and warrants granted for services
              
              
              292,000
              
              
              67,350
              
              
              5,249,003Reduction
                  of legal costs
              
              
              -
              
              
              -
              
              
              (130,000
              )Write-off
                  of subscriptions receivable
              
              
              -
              
              
              -
              
              
              112,500Impairment
                  loss on assets
              
              
              -
              
              
              -
              
              
              9,709Loss
                  on disposal of equipment
              
              
              -
              
              
              -
              
              
              30,364Write-off
                  of receivable
              
              
              -
              
              
              -
              
              
              562,240Note
                  payable issued for litigation
              
              
              -
              
              
              -
              
              
              385,000Changes
                  in operating assets and liabilitiesAccounts
                  receivable
              
              
              -
              
              
              -
              
              
              (7,529
              )Accounts
                  payable
              
              
              59,337
              
              
              (183,321
              )
              
              3,432,804Accrued
                  expenses
              
              
              67,957
              
              
              7,372
              
              
              234,398Net
                  Cash Provided by (Used in) Operating Activities
              
              
              89,727
              
              
              (547,849
              )
              
              (10,580,758
              )**Cash
                  Flows From Investing Activities**Increase
                  in deposits
              
              
              -
              
              
              -
              
              
              (51,100
              )Purchase
                  of equipment
              
              
              -
              
              
              -
              
              
              (221,334
              )Issuance
                  of note receivable
              
              
              -
              
              
              -
              
              
              (313,170
              )Payments
                  received on note receivable
              
              
              -
              
              
              -
              
              
              130,000Net
                  Cash Used in Financing Activities
              
              
              -
              
              
              -
              
              
              (455,604
              )**Cash
                  Flows From Investing Activities**Issuance
                  of common stock, preferred stock, and warrants for cash
              
              
              -
              
              
              -
              
              
              10,033,845Contributed
                  equity
              
              
              -
              
              
              -
              
              
              131,374Proceeds
                  from notes payable
              
              
              -
              
              
              -
              
              
              1,336,613Payments
                  on notes payable
              
              
              -
              
              
              -
              
              
              (801,287
              )Proceeds
                  from convertible notes payable
              
              
              -
              
              
              -
              
              
              571,702Payments
                  on convertible notes payable
              
              
              -
              
              
              -
              
              
              (98,500
              )Net
                  Cash Provided by Financing Activities
              
              
              -
              
              
              -
              
              
              11,173,747**Net
                  Increase (Decrease) in Cash**
              
              
              89,727
              
              
              (547,849
              )
              
              137,385**Cash
                  at Beginning of Period**
              
              
              47,658
              
              
              654,438
              
              
              -**Cash
                  at End of Period**
              
              $
              137,385
              
              $
              106,589
              
              $
              137,385


The
      accompanying notes are an integral part of these condensed consolidated
      financial statements




3


**MEDICAL
      DISCOVERIES, INC. AND SUBSIDIARIES**


**(A
      Development Stage Company)**


**Notes
      to Unaudited Condensed Consolidated Financial
      Statements**


**Note
      1** - **Basis
      of Presentation**





*Unaudited
      Interim Consolidated Financial Statements*





The
      accompanying unaudited condensed consolidated 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 accounting
      principles generally accepted in the United States of America have been
      condensed or omitted pursuant to such rules and regulations. In the opinion
      of
      management, all adjustments and disclosures necessary for a fair presentation
      of
      these financial statements have been included and are of normal, recurring
      nature. These financial statements should be read in conjunction with the
      financial statements and notes thereto included in the Company’s annual report
      on Form 10-KSB for the year ended December 31, 2006, as filed with the
      Securities and Exchange Commission. The results of operations for the three
      months ended March 31, 2007, may not be indicative of the results that may
      be
      expected for the year ending December 31, 2007.





*Loss
      per Common Share*





Loss
      per
      share amounts are computed by dividing net loss applicable to common
      shareholders by the weighted-average number of common shares outstanding during
      each period. Diluted loss per share amounts are computed assuming the issuance
      of common stock for potentially dilutive common stock equivalents. All
      outstanding stock options, warrants, and convertible common stock are currently
      antidilutive and have been excluded from the diluted loss per share
      calculations. The potentially dilutive common stock equivalents at March 31,
      2007 and 2006 are as follows:


**2007**
              
              **2006**Convertible
                  notes
              
              
              128,671
              
              
              128,671Convertible
                  preferred stock
              
              
              141,106,493
              
              
              38,620,690Stock
                  warrants
              
              
              38,973,861
              
              
              40,923,861Stock
                  options and compensation-based warrants
              
              
              29,883,000
              
              
              19,983,000210,092,025
              
              
              99,656,222




As
      of the
      date of these financial statements, the Company does not have enough authorized
      shares to meet the commitments it has entered into. Management is currently
      considering alternative solutions to this situation.





*Recently
      Issued Accounting Standards*




In
        September 2006, the FASB issued SFAS No. 157, *Fair
        Value Measurements* (SFAS
        157). SFAS 157 defines fair value, establishes a framework for measuring
        fair
        value in generally accepted accounting principles, and expands disclosures
        about
        fair value measurements. Certain aspects of this statement are effective
        for
        financial statements issued for fiscal years beginning after November 15,
        2007.
        Accordingly, the Company will adopt SFAS 157 in 2008 to the extent that it
        is
        effective. The Company is currently evaluating the impact of SFAS 157 on
        the
        financial statements.





In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* -
      including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 allows
      measurement at fair value of eligible financial assets and liabilities that
      are
      not otherwise measured at fair value. If the fair value option for an eligible
      item is elected, unrealized gains and losses for that item shall be reported
      in
      current earnings at each subsequent reporting date. SFAS 159 also establishes
      presentation and disclosure requirements designed to draw comparison between
      the
      different measurement attributes the Company elects for similar types of assets
      and liabilities. This statement is effective for fiscal years beginning after
      November 15, 2007. Accordingly, the Company will adopt SFAS 159 in 2008, to
      the
      extent that it is effective. The Company is in the process of evaluating the
      application of the fair value option and its effect on its financial position
      and results of operations.





4


**MEDICAL
        DISCOVERIES, INC. AND SUBSIDIARIES**
 **(A
        Development Stage Company)**
 **Notes
        to Unaudited Condensed Consolidated Financial
        Statements**




**Note
      2** - **Going
      Concern Considerations**





The
      Company’s recurring losses from development-stage activities in the current and
      prior years raise substantial doubt about the Company’s ability to continue as a
      going concern. As further described in the following footnotes, management
      of
      the Company is restructuring and reorganizing the Company to reposition the
      Company’s future business and related operations. In February 2007, the Company
      engaged a consulting firm to assist it in resolving its financial issues, to
      obtain advice regarding any strategic alternatives that may be available to
      it,
      and to prevent the Company from losing all of its assets in bankruptcy. The
      Company has discontinued its bio-pharmaceutical operations and has sold certain
      assets of this business segment and has an agreement to sell the remainder
      of
      the assets of this business for cash and assumption of liabilities. The Company
      has also obtained a secured term credit facility to provide interim financing
      until the sale of assets closes, of which the Company has utilized $350,000.
      The
      Company has also entered into a share exchange agreement with an entity for
      the
      purpose of developing a business involving the production of bio-diesel. In
      connection with this new business direction, the Company has entered into an
      employment agreement for a new Chief Operating Officer, who will also become
      the
      Chief Executive Officer in the near future and has entered into other consulting
      and service agreements in connection with the bio-diesel operation.





The
      ability of the Company to continue as a going concrn is dependent upon the
      success of these new planned operations. 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.





**Note
      3 - Discontinued Operations**





During
      the three months ended March 31, 2007, the Board of Directors determined that
      it
      could no longer fund the development of its two drug candidates and could not
      obtain additional funding for these drug candidates. The Board evaluated the
      value of both of its developmental stage drug candidates. In March, 2007, the
      Board determined that the best course of action was to discontinue further
      development of these two drug candidates and sell these
      technologies.





*Eucodis
      Agreement*





On
      March
      8, 2007, the Company entered into a binding letter of intent with Eucodis
      Pharmaceuticals Forschungs - und Entwicklungs GmbH, an Austrian company
      ( Eucodis ),
      regarding their intent to proceed with the evaluation, negotiation, and
      execution of a sale and purchase agreement related to certain assets of the
      Company. On July 6, 2007, the Company entered into a sale and purchase agreement
      (the Asset
      Sale Agreement )
      with
      Eucodis, pursuant to which Eucodis agreed to acquire certain assets of the
      Company in consideration for a cash payment and the assumption by Eucodis of
      certain indebtedness of the Company. Pursuant to the Second Amendment to the
      Asset Sale Agreement, the sale is scheduled to be consummated on or before
      January 31, 2008 after the shareholders of the Company have approved the
      transaction.




5


**MEDICAL
        DISCOVERIES, INC. AND SUBSIDIARIES**
 **(A
        Development Stage Company)**
 **Notes
        to Unaudited Condensed Consolidated Financial
        Statements**




The
      assets to be acquired by Eucodis pursuant to the Asset Sale Agreement include
      all of the Company’s right, title and interest in all patents, patent
      applications, United
      States and foreign regulatory files and data ,
      pre-clinical study data and anecdotal clinical trial data concerning SaveCream.
      In addition, at the closing of the sale, the Company will also assign to Eucodis
      all of its right, title and interest in a co-development agreement with Eucodis,
      dated as of July 29, 2006, related to the co-development and licensing of
      SaveCream (including the intellectual property rights acquired in connection
      with that development) and their rights under certain
      other contracts relating to SaveCream.





The
      purchase price to be paid by Eucodis for acquiring these assets will be
€4,007,534 (approximately $5,906,000 under exchange rates in effect as of
      November 30, 2007), is comprised of (i) a cash payment of €1,538,462
      (approximately $2,267,000 under exchange rates in effect as of November 30,
      2007) less $200,000 received in March 2007 under the binding letter of intent,
      and (ii) Eucodis’ assumption of an aggregate of €2,469,072 (approximately
      $3,639,000 under exchange rates in effect as of November 30, 2007), constituting
      specific indebtedness currently owed and other commitments to certain creditors
      of the Company. In addition, at the closing of the sale, Eucodis will assume
      (i)
      all financial and other obligations of the Company under certain contracts
      to be
      assigned to Eucodis, and (ii) certain other costs incurred by the Company since
      February 28, 2007 in connection with preserving the acquired assets for the
      benefit of Eucodis until closing of the sale.





*MDI-P
      Agreement*





The
      Company also entertained various offers to purchase the Company’s rights to the
      assets related to the MDI-P compound. On August 9, 2007, the Company sold the
      MDI-P related assets for $310,000 in cash. The sale included the patents, name,
      and other intellectual property, research results and test data, production
      units and equipment, and other assets related to this technology. No liabilities
      were assumed by the purchaser in this transaction.





*Accounting
      for Discontinued Operations*





Pursuant
      to accounting rules for discontinued operations, the Company has classified
      all
      revenue and expense for 2007 and prior periods related to the operations of
      its
      bio-pharmaceutical business as discontinued operations. For all periods prior
      to
      March 2007, the Company has reclassified all revenue and operating expenses
      to
      discontinued operations, except for estimated general corporate overhead,
      because all of its operations related to the discontinued technologies. The
      assets being sold and the liabilities being assumed in the planned sales have
      been segregated in the accompanying balance sheets and are characterized as
      Assets Held for Sale and Current Liabilities Associated with Assets Held for
      Sale, respectively. Revenues of $200,000 for the three months ended March 31,
      2007 (none for the three months ended March 31, 2006) are included in the loss
      from discontinued operations. The Company has not recorded any gain or loss
      at
      March 31, 2007 associated with the planned sale of the bio-pharmaceutical
      business. The following table presents the main classes of assets and
      liabilities associated with the discontinued business.




6


**MEDICAL
        DISCOVERIES, INC. AND SUBSIDIARIES**
 **(A
        Development Stage Company)**
 **Notes
        to Unaudited Condensed Consolidated Financial
        Statements**


**March
                  31,**
              
              **December
                  31,****2007**
              
              **2006**Assets:Property
                  and equipment, net of accumulated depreciation
              
              $
              57,059
              
              $
              61,460Liabilities:Current
                  liabilities:Accounts
                  payable
              
              $
              485,713
              
              $
              472,993Research
                  and development obligation
              
              
              2,474,190
              
              
              2,441,445$
              2,959,903
              
              $
              2,914,438


**Note
      4 - Consulting Agreements**





In
      February 2007, the Company engaged the Emmes Group, a consulting firm, to assist
      it in resolving its financial issues, to obtain advice regarding any strategic
      alternatives that may be available to it, and to prevent the Company from losing
      all of its assets in bankruptcy. During the past several months, the Company
      has
      explored a number of transactions that would (i) prevent the Company’s
      shareholders from losing their entire investment in the Company and (ii) enable
      the Company to repay some of its currently outstanding debts and liabilities.
      The consulting agreement has a term of one year. As compensation for its
      services, the consultant is to receive $15,000 per month plus a warrant to
      purchase 5,000,000 shares of the Company’s common stock. The warrant has an
      exercise price of $0.03 per share, contains a cash-less exercise provision,
      and
      expires ten years from date of issue. The
      Company valued this warrant at $146,000 using the Black-Scholes pricing model.
      The weighted average fair value of the stock options was $0.0292 per share.
      The
      weighted-average assumptions used for the calculation of fair value were
      risk-free rate of 4.84%, volatility of 134%, expected life of ten years, and
      dividend yield of zero. The fair value of the warrant was expensed as
      share-based compensation on the date of issue.





In
      February 2007, the Company entered into another consulting agreement with an
      individual to assist it in the preparation of financial statements and reporting
      to the SEC. The consulting agreement had a term of one year. As compensation
      for
      its services, the consultant was to receive $10,000 per month plus a warrant
      to
      purchase 5,000,000 shares of the Company’s common stock. The warrant has an
      exercise price of $0.03 per share, contains a cash-less exercise provision,
      and
      expires ten years from date of issue. The
      Company valued this warrant at $146,000 using the Black-Scholes pricing model.
      The weighted average fair value of the stock options was $0.0292 per share.
      The
      weighted-average assumptions used for the calculation of fair value were
      risk-free rate of 4.84%, volatility of 134%, expected life of ten years, and
      dividend yield of zero. The fair value of the warrant was expensed as
      share-based compensation on the date of issue. This consulting
      agreement was terminated in May 2007. Since the consulting agreement was
      terminated prior to its expiration date, the Company’s obligations under the
      consulting agreement, if any, for the period after the termination date are
      unclear. No demand for any additional compensation has been made against the
      Company under the consulting agreement.





**Note
      5 - Stock Options and Warrants**





**Compensation-Based
      Stock Warrants and Options**





The
      Company has two incentive stock option plans wherein 24,000,000 shares of
      the Company’s common stock are reserved for issuance thereunder.





As
      described in Note 4 to the condensed consolidated financial statements, the
      Company issued compensation-based warrants to purchase 10,000,000 shares of
      common stock during the three months ended March 31, 2007. The warrants have
      an
      exercise price of $0.03 per share, contain a cash-less exercise provision,
      and
      expire ten years from date of issue. During the three months ended March 31,
      2006, the Company granted a stock option to a former officer and director.
      The
      option is for 500,000 shares exercisable at $0.25 per share through
      December 31, 2010. The option was fully vested on January 1, 2006. No
      income tax benefit has been recognized for share-based compensation arrangements
      and no compensation cost has been capitalized in the balance sheet.




7


**MEDICAL
        DISCOVERIES, INC. AND SUBSIDIARIES**
 **(A
        Development Stage Company)**
 **Notes
        to Unaudited Condensed Consolidated Financial
        Statements**




A
      summary
      of the status of the compensation-based warrants and options outstanding at
      March 31, 2007, and changes during the three months then ended is presented
      in
      the following table:


**Compensation-
                  Based Stock Warrants and Options**
              
              **Weighted
                  Average Exercise Price**
              
              **Weighted
                  Average Remaining Contractual Life**
              
              **Aggregate
                  Intrinsic Value**Outstanding
                  at January 1, 2007
              
              
              19,883,000
              
              $
              0.05Granted
              
              
              10,000,000
              
              
              0.03Expired
              
              
              -
              
              
              -Outstanding
                  at March 31, 2007
              
              
              29,883,000
              
              $
              0.04
              
              
              7.4
                  years
              
              $
              100,000Exercisable
                  at March 31, 2007
              
              
              29,883,000
              
              $
              0.04
              
              
              7.4
                  years
              
              $
              100,000




At
      March
      31, 2007, 80,000 of the options outstanding have no stated contractual life.
      The
      fair value of each stock option granted or compensation-based warrant issued
      to
      an employee or consultant is estimated on the date of grant or issue using
      the
      Black-Scholes pricing model. The weighted average fair value of stock warrants
      issued to consultants during the three months ended March 31, 2007 was $0.03
      per
      share. The weighted-average assumptions used for warrants issued during the
      three months ended March 31, 2007 were risk-free rate of 4.84%, volatility
      of
      134%, expected life of ten years, and dividend yield of zero. The weighted
      average fair value of stock options granted to the employee during the three
      months ended March 31, 2006 was $0.13 per share. The weighted-average
      assumptions used for options granted during the three months ended March 31,
      2006 were risk-free rate of 4.3%, volatility of 152%, expected life of five
      years, and dividend yield of zero.





The
      assumptions employed in the Black-Scholes option pricing model include the
      following. The expected life of stock options represents the period of time
      that
      the stock options granted are expected to be outstanding based on historical
      exercise trends. The expected volatility is based on the historical price
      volatility of our common stock. The risk-free interest rate represents the
      U.S.
      Treasury constant maturities rate for the expected life of the related stock
      warrants. The dividend yield represents our anticipated cash dividend over
      the
      expected life of the stock warrants.





The
      Company recognized $292,000 of share-based compensation for warrants issued
      during the three months ended March 31, 2007. The Company recognized $67,350
      of
      share-based compensation for options granted during the three months ended
      March
      31, 2006. As of March 31, 2007, there was no unrecognized compensation cost
      related to stock options or warrants that will be recognized in the future.




8


**MEDICAL
      DISCOVERIES, INC. AND SUBSIDIARIES**


**(A
      Development Stage Company)**


**Notes
      to Unaudited Condensed Consolidated Financial
      Statements**




**Other
      Stock Warrants**





A
      summary
      of the status of the other warrants outstanding at March 31, 2007, and changes
      during the three months then ended is presented in the following table:


**Shares
                  Under Warrant**
              
              **W
                  eighted Average Exercise Price**Outstanding
                  at January 1, 2007
              
              
              38,973,861
              
              $
              0.19Issued
              
              
              -
              
              
              -Expired
              
              
              -
              
              
              -Outstanding
                  at March 31, 2007
              
              
              38,973,861
              
              $
              0.19




**Note
      6 -** **Subsequent
      Events**





**Global
      Clean Energy Holdings, LLC**





Having
      agreed to discontinue its bio-pharmaceutical operations
      and dispose of the related assets, the Company considered entering
      into a number of other businesses that would enable it to be able to
      provide the shareholders with future value. The Company’s Board of
      Directors decided to develop a business to produce and sell seed oils, including
      seed oils harvested from the planting and cultivation of the *Jatropha
      curcas* plant,
      for the purpose of providing feedstock oil intended for the generation of methyl
      ester, otherwise known as bio-diesel (the “Jatropha Business”). The Company’s
      Board concluded that there was a significant opportunity to participate in
      the
      rapidly growing biofuels industry, which previously was mainly driven by high
      priced, edible oil-based feedstocks. In order to commence its new Jatropha
      Business, effective September 1, 2007, the Company (i) hired Richard Palmer,
      an
      energy consultant, and a member of Global Clean Energy Holdings LLC (“Global”)
      to act as its new President, Chief Operating Officer and future Chief Executive
      Officer, (ii) engaged Mobius Risk Group, LLC, a Texas company engaged in
      providing energy risk advisory services, to provide it with consulting services
      related to the development of the Jatropha Business, and (iii) acquired certain
      trade secrets, know-how, business plans, term sheets, business relationships,
      and other information relating to the cultivation and production of seed oil
      from the Jatropha plant for the production of bio-diesel from Global.





*Share
      Exchange Agreement*





The
      Company entered into a share exchange agreement (the Global
      Agree ment)
      pursuant to which the Company acquired all of the outstanding ownership
      interests in Global Clean Energy Holdings, LLC, a Delaware limited liability
      company ( Global )
      on
      September 7, 2007 from Mobius Risk Group, LLC ( Mobius )
      and
      from Richard Palmer (Mr. Palmer). Global is an entity that has certain trade
      secrets, know-how, business plans, term sheets, business relationships, and
      other information relating to the start-up of a business related to the
      cultivation and production of seed oil from the seed of the Jatropha plant,
      for
      the purpose of providing feedstock oil intended for the production of
      bio-diesel. Under the Global Agreement, the Company issued 63,945,257 shares
      of
      its common stock for all of the issued and outstanding membership interests
      of
      Global. Of the 63,945,257 shares issued under the Global Agreement, 36,540,146
      shares were issued and delivered at the closing of the Global Agreement without
      any restrictions. The remaining 27,405,111 shares of common stock were, however,
      held in escrow by the Company, subject to forfeiture in the event that certain
      specified performance and market-related milestones are not achieved. Upon
      the
      satisfaction from time to time of the operational and market capitalization
      condition milestones, the restricted shares will be released by the Company
      from
      escrow and delivered to the buyers in accordance with the terms and conditions
      of the Global Agreement. In the event that all of the milestone conditions
      are
      not achieved, the restricted shares that have not been released from escrow
      will
      be cancelled by the Company and thereafter cease to be outstanding.




9


**MEDICAL
        DISCOVERIES, INC. AND SUBSIDIARIES**
 **(A
        Development Stage Company)**
 **Notes
        to Unaudited Condensed Consolidated Financial
        Statements**




Of
      the
      restricted shares issued under the Global Agreement, 13,702,556 shares will
      be
      released from escrow if and when certain land lease agreements suitable for
      the
      planting and cultivation of *Jatropha
      curcas* are
      executed and certain operation management agreements with a third-party land
      and
      operations management company with respect to the management, planting and
      cultivation of *Jatropha
      curcas* are
      executed. These restricted shares will be held in escrow subject to the
      satisfaction of these milestones, at which time such shares will be released
      from escrow and delivered to the sellers.





The
      remaining 13,702,555 restricted shares issued under the Global Agreement will
      be
      released from escrow upon satisfaction of certain market capitalization and
      average daily trading volume levels. These restricted shares will be held in
      escrow subject to the satisfaction of these milestones, at which time such
      shares will be released from escrow and delivered to the sellers. As of November
      30, 2007, a total of 4,567,518 shares had been released from escrow and
      delivered to the sellers.





The
      Company is currently evaluating the accounting effect of the Share Exchange
      Agreement.





*Mobius
      Consulting Agreement*





Concurrent
      with the execution of the Global Agreement, the Company entered into a
      consulting agreement with Mobius pursuant to which Mobius has agreed to provide
      consulting services to the Company in connection with the Company’s new Jatropha
      bio-diesel feedstock business. The Company engaged Mobius as a consultant to
      obtain Mobius’ experience and expertise in the feedstock/bio-diesel market to
      assist the Company and Mr. Palmer in developing this new line of operations
      for
      the Company. Mobius has agreed to provide the following services to the Company:
      (i) manage and supervise a contemplated research and development program
      contracted by the Company and conducted by the University of Texas Pan American
      regarding the location, characterization, and optimal economic propagation
      of
      the Jatropha ** plant;
      and (ii) assist with the management and supervision of the planning,
      construction, and start-up of plant nurseries and seed production plantations
      in
      Mexico, the Caribbean or Central America.





The
      term
      of the agreement is twelve (12) months, or until the scope of work under the
      agreement has been completed. Mobius will supervise the hiring of certain staff
      to serve in management and operations roles of the Company, or hire such persons
      to provide similar services as independent contractors. Mobius’ compensation for
      the services provided under the agreement is a monthly retainer of $45,000.
      The
      Company will also reimburse Mobius for reasonable business expenses incurred
      in
      connection with the services provided. The agreement contains customary
      confidentiality provisions with respect to any confidential information
      disclosed to Mobius or which Mobius receives while providing services under
      the
      agreement.





*Palmer
      Employment Agreement*





Effective
      September 1, 2007, the Company entered into an employment agreement with Richard
      Palmer pursuant to which the Company hired Mr. Palmer to serve as its President
      and Chief Operating Officer. Mr. Palmer was also appointed to serve as director
      on the Company’s Board of Directors to serve until the next election of
      directors by the Company’s shareholders. Upon the resignation of the current
      Chief Executive Officer, Mr. Palmer also will become the Company’s Chief
      Executive Officer. The Company hired Mr. Palmer to take advantage of his
      experience and expertise in the feedstock/bio-diesel space, and in particular,
      in the Jatropha bio-diesel and feedstock business. The term of employment
      commenced September 1, 2007 and ends on September 30, 2010, unless terminated
      in
      accordance with the provisions of the agreement.




10


**MEDICAL
        DISCOVERIES, INC. AND SUBSIDIARIES**
 **(A
        Development Stage Company)**
 **Notes
        to Unaudited Condensed Consolidated Financial
        Statements**




Mr.
      Palmer’s compensation package includes a base salary of $250,000, subject to
      annual increases based on changes in the Consumer Price Index, and a bonus
      payment based on Mr. Palmer’s satisfaction of certain performance criteria
      established by the compensation committee of the Company’s Board of Directors.
      The bonus amount in any fiscal year will not exceed 100% of Mr. Palmer’s base
      salary. Mr. Palmer is eligible to participate in the Company’s employee stock
      option plan and other welfare plans. The Company granted Mr. Palmer an incentive
      option to purchase up to 12,000,000 shares of its common stock at an exercise
      price of $0.03 (the trading price on the date the agreement was signed). The
      options vest upon the Company’s achievement of certain market capitalization
      goals. When the Company’s market capitalization reaches $75 million, the
      incentive option will vest with respect to 6,000,000 shares. When the Company’s
      market capitalization reaches $120 million, the incentive option will vest
      with
      respect to the remaining 6,000,000 shares. The option expires five years after
      grant.





If
      Mr.
      Palmer’s employment is terminated by the Company without “cause” or by Mr.
      Palmer for “good reason”, he will be entitled to severance payments including
      100% of his then-current annual base salary, plus 50% of the target bonus for
      the fiscal year in which his employment is terminated, and the incentive option
      to purchase 12,000,000 shares of common stock shall vest following termination
      of Mr. Palmer’s employment. The Company is currently evaluating the proper
      accounting treatment for this employment agreement and option
      issuance.





*LODEMO
      Agreement*





On
      October 15, 2007, the Company entered into a service agreement with Corporativo
      LODEMO S.A DE CV, a Mexican corporation (the LODEMO
      Group ).





The
      Company has decided to initiate its Jatropha Business in Mexico, and has already
      identified parcels of land in Mexico to plant and cultivate Jatropha. In order
      to obtain all of the logistical and other services needed to operate a
      large-scale farming and transportation business in Mexico, the Company entered
      into the service agreement with the LODEMO Group, a privately held Mexican
      company with substantial land holdings, significant experience in diesel
      distribution and sales, liquids transportation, logistics, land development
      and
      agriculture.





Under
      the
      supervision of the Company’s management and Mobius, the LODEMO Group will be
      responsible for the establishment, development, and day-to-day operations of
      the
      Jatropha Business in Mexico, including the extraction of the oil from the
      Jatropha seeds, the delivery of the Jatropha oil to buyers, the purchase or
      lease of land in Mexico, the establishment and operation of one or more Jatropha
      nurseries, the clearing, planting and cultivation of the Jatropha fields, the
      harvesting of the Jatropha seeds, the operation of the Company’s oil extraction
      facilities, and the logistics associated with the foregoing. Although the LODEMO
      Group will be responsible for identifying and acquiring the farmland, ownership
      of the farmland or any lease thereto will be held directly by the Company or
      by
      a Mexican subsidiary of the Company. The LODEMO Group will be responsible for
      hiring and managing all necessary employees. All direct and budgeted costs
      of
      the Jatropha Business in Mexico will be borne by the Company.




11


**MEDICAL
        DISCOVERIES, INC. AND SUBSIDIARIES**
 **(A
        Development Stage Company)**
 **Notes
        to Unaudited Condensed Consolidated Financial
        Statements**




The
      LODEMO Group will provide the foregoing and other necessary services for a
      fee
      primarily based on the number of hectares of Jatropha under cultivation. The
      Company has agreed to pay the LODEMO Group a fixed fee per year of $60 per
      hectare of land planted and maintained with minimum payments based on 10,000
      hectares of developed land, to follow a planned planting schedule. The Agreement
      has a 20-year term but may be terminated earlier by the Company under certain
      circumstances. The LODEMO Group also will potentially receive incentive
      compensation for controlling costs below the annual budget established by the
      parties, production incentives for increase yield and a sales commission for
      biomass sales.





*Loan
      Agreement*





In
      order
      to fund ongoing operations pending closing of the sale to Eucodis, the Company
      entered into the Loan Agreement with, and issued a promissory note in favor
      of,
      with Mercator Momentum Fund III, L.P. ( Mercator ).
      Pursuant to the loan agreement, Mercator made available to the Company a secured
      term credit facility in principal amount of $1,000,000. The promissory note
      initially was due and payable on December 14, 2007. As of December 13, 2007,
      the
      Company owed Mercator $250,000 under the loan. Mercator has agreed to extend
      the
      maturity date of the $250,000 to February 21, 2008. The foregoing loan is
      secured by a lien on all of our assets. The lender and its affiliates currently
      own all of the issued and outstanding shares of Series A Convertible Preferred
      Stock of the Company.





Under
      the
      loan agreement, interest is payable on the loan at a rate of 12% per annum,
      payable monthly. In connection with the closing of the loan, the Company agreed
      to the e xchange
      of the warrants to purchase 27,452,973 shares at a price of $0.1967 per share
      previously issued to the lender and certain of its affiliates to (i) lower
      the
      exercise price of such warrants to $0.01 per share, (ii) permit the cash-less
      exercise of the warrants, and (iii) extend the expiration date thereof to
      September 30, 2013. The
      Company is currently evaluating the accounting effect of the loan agreement
      and
      exchange of warrants.





**Consultant
      Agreement**





On
      September 14, 2007, the Company entered into a one-year agreement with a
      consultant for investor relations services. Under the agreement, the Company
      agreed to pay total compensation of $105,000 over the one-year term. As
      additional compensation, the Company issued 4,357,298 shares of restricted
      common stock to the consultant and granted piggyback registration rights for
      the
      stock to be registered in connection with the Company’s next registration of
      securities. The
      Company is currently evaluating the accounting treatment for this consulting
      agreement.





**Conversion
      of Series A Preferred Stock**





On
      September 17, 2007, the preferred stockholders gave notice to the Company and
      converted 5,492 shares of Series A Preferred Stock into 10,983,521 shares of
      common stock. The conversion price was $0.05 per share.





**Release
      and Settlement Agreement**





Mercator
      Momentum Fund, LP; Monarch Pointe Fund, Ltd.; and Mercator Momentum Fund III,
      LP, each a private investment entity (collectively, the MAG
      Funds )
      purchased shares of the Company’s Series A Preferred Convertible Stock in 2004
      and in 2005. In connection with the 2005 investment, the Company agreed to
      eliminate the conversion price floor of the Series A Stock. The Company failed
      to file an amendment to the Series A Stock Certificate of Designations of
      Preferences and Rights for the Series A Stock that would have eliminated the
      conversion price floor. Accordingly, in connection with an intended conversion
      of some of their Series A Stock in September 2007, the MAG Funds were required
      to convert Series A Stock at a conversion price higher than the price that
      would
      have applied if the Amendment had been filed as agreed.




12


**MEDICAL
        DISCOVERIES, INC. AND SUBSIDIARIES**
 **(A
        Development Stage Company)**
 **Notes
        to Unaudited Condensed Consolidated Financial
        Statements**




On
      October 22, 2007, the Company executed and entered into a Release and Settlement
      Agreement (the Release
      Agreement ),
      with
      the MAG Funds to settle all losses and damages that MAG may have suffered,
      and
      may hereafter suffer, as result of the Company’s failure to file the amendment
      to the Series A Stock Certificate of Designations of Preferences and Rights
      for
      the Series A Stock. Pursuant to the Release Agreement, the Company issued to
      the
      MAG Funds a ten-year warrant to acquire up to 17,000,000 shares of the Company’s
      common stock at an exercise price of $0.01 per share expiring October 17, 2017.
      The warrant contains a cash-less exercise provision, and the initial warrant
      price is subject to adjustments in connection with (i) the Company’s issuance of
      dividends in shares of Common Stock, or shares of Common Stock or other
      securities convertible into shares of Common Stock without consideration, (ii)
      any cash paid or payable to the holders of Common Stock other than as a regular
      cash dividend, and (ii) future stock splits, reverse stock splits, mergers
      or
      reorganizations, and similar changes affecting common stockholders.





The
      warrant issued to the MAG Funds contain beneficial ownership limitations, which
      preclude the MAG Funds from exercising its warrant if, as a result of such
      conversion or exercise, the MAG Funds would own beneficially more than 9.99%
      of
      the Company’s outstanding common stock then outstanding.





Pursuant
      to the Release Agreement, the MAG Funds released the Company from any and all
      claims, past, present or future, relating to the losses or the Company’s failure
      to file the amendment. In addition, MAG has agreed not to sue the Company in
      connection with the losses or the Company’s failure to file the
      Amendment.





The
      Company is currently evaluating the accounting significance of this release
      and
      settlement agreement.





**Issuance
      of Series B Preferred Stock**





In
      order
      to obtain additional working capital, on November 6, 2007, the Company entered
      into a Securities Purchase Agreement with two accredited investors, pursuant
      to
      which the Company sold a total of 13,000 shares of our newly authorized Series
      B
      Convertible Preferred Stock ( Series
      B Shares )
      for an
      aggregate purchase price of $1,300,000. Each share of the Series B Shares has
      a
      stated value of $100.





The
      Series B Shares may, at the option of each holder, be converted at any time
      or
      from time to time into shares of our common stock at the conversion price then
      in effect. The number of shares into which one Series B Share shall be
      convertible is determined by dividing $100 per share by the conversion price
      then in effect. The
      initial conversion price per share for the Series B Shares is $0.11, which
      is
      subject to appropriate adjustment for certain events, including stock splits,
      stock dividends, combinations, or other recapitalizations affecting the Series
      B
      Shares.





Each
      holder of Series B Shares is entitled to the number of votes equal to the number
      of shares of our common stock into which the Series B Shares could be converted
      on the record date for such vote, and shall have voting rights and powers equal
      to the voting rights and powers of the holders of the Company’s common stock. In
      the event of our dissolution or winding up, each share of the Series B Shares
      is
      entitled to be paid an amount equal to $100 (plus any declared and unpaid
      dividends) out of the assets of the Company then available for distribution
      to
      shareholders; subject, however, to the senior rights of the holders of Series
      A
      Stock.




13


**MEDICAL
        DISCOVERIES, INC. AND SUBSIDIARIES**
 **(A
        Development Stage Company)**
 **Notes
        to Unaudited Condensed Consolidated Financial
        Statements**




No
      dividends are required to be paid to holders of the Series B Shares. However,
      the Company may not declare, pay or set aside any dividends on shares of any
      class or series of our capital stock (other than dividends on shares of our
      common stock payable in shares of common stock) unless the holders of the Series
      B Shares shall first receive, or simultaneously receive, an equal dividend.





**Release
      and Settlement Agreement with Chief Executive Officer**





On
      August
      31, 2007, the Company entered into a Settlement and Release Agreement with
      Judy
      Robinett, the Company’s current Chief Executive Officer, pursuant to which Ms.
      Robinett agreed to continue to act as the Company’s transitional Chief Executive
      Officer. Under the agreement, Ms. Robinett agreed to, among other things, assist
      the Company in the sale of its legacy assets, complete the preparation and
      filing of the delinquent reports to the Securities and Exchange Commission
      (the SEC )
      that
      related to the periods prior to the appointment of Mr. Palmer, and provide
      certain shareholder and creditor related services. Upon the completion of the
      foregoing matters, in particular the filing of the delinquent reports to the
      SEC, Ms. Robinett will resign, and Mr. Palmer will thereafter assume the office
      of Chief Executive Officer. Under the agreement, Ms. Robinett agreed to (i)
      forgive her potential right to receive $1,851,805 in accrued and unpaid
      compensation, un-accrued and pro-rata bonuses, and severance pay and (ii) the
      cancellation of stock options to purchase 14,000,000 shares of common stock
      at
      an exercise price of $0.02 per share. In consideration for her services, the
      forgiveness of the foregoing cash payments, the cancellation of the foregoing
      stock options, and settlement of other issues, the Company agreed to (a) pay
      Ms.
      Robinett $500,000 upon the receipt of the Eucodis cash payment under the
      agreement to sell the SaveCream Assets, (b) pay Ms. Robinett a commission of
      fifteen percent of the gross proceeds received by the Company from the sale
      of
      the MDI-P asset, (c) pay Ms. Robinett $20,833 in monthly salary for serving
      as
      transitional Chief Executive Officer of the Company during the period from
      April
      1, 2007, until the completion of the transitional period and the issuance of
      the
      Company’s delinquent SEC reports, and (d) permit Ms. Robinett to retain some of
      her previously granted incentive stock options in such an amount allowing her
      to
      purchase up to two million shares of common stock, which options shall continue
      to have the same terms and conditions as currently in existence, including
      an
      option price of $0.01 per share and expiration date of December 31,
      2112.





14




**ITEM
      2.**  **MANAGEMENTS’
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS** .




*This
      Report, including any documents which may be incorporated by reference into
      this
      Report, contains “Forward-Looking Statements” within the meaning of Section 27A
      of the Securities Act of 1933, as amended, and Section 21E of the Securities
      Exchange Act of 1934, as amended, including, without limitation, statements
      regarding our business still being in the developmental stage, our lack of
      operating revenues or profits, our dependence on raising significant additional
      capital, our auditors’ expression of substantial doubt as to our ability to
      continue as a going concern, the government regulation to which we are subject,
      our exposure to certain pricing risks, the competition we face, our stock being
      thinly traded and subject to manipulation, the volatility of our stock price,
      the risk that our shareholders could suffer substantial dilution, and the fact
      that we have not paid dividends to date. All statements other than statements
      of
      historical fact are “Forward-Looking Statements” for purposes of these
      provisions, including any projections of earnings, revenues or other financial
      items, any statements of the plans and objectives of management for future
      operations, any statements concerning proposed new products or services, any
      statements regarding future economic conditions or performance, and any
      statements of assumptions underlying any of the foregoing. All Forward-Looking
      Statements included in this document are made as of the date hereof and are
      based on information available to us as of such date. We assume no obligation
      to
      update any Forward-Looking Statement. In some cases, Forward-Looking Statements
      can be identified by the use of terminology such as “may,” “will,” “expects,”
“plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or
“continue,” or the negative thereof or other comparable terminology. Although we
      believe that the expectations reflected in the Forward-Looking Statements
      contained herein are reasonable, there can be no assurance that such
      expectations or any of the Forward-Looking Statements will prove to be correct,
      and actual results could differ materially from those projected or assumed
      in
      the Forward-Looking Statements. Future financial condition and results of
      operations, as well as any Forward-Looking Statements are subject to inherent
      risks and uncertainties, including any other factors referred to in our
      company’s press releases and reports filed with the Securities and Exchange
      Commission. All subsequent Forward-Looking Statements attributable to our
      company or persons acting on its behalf are expressly qualified in their
      entirety by these cautionary statements. Additional factors that may have a
      direct bearing on our company’s operating results are described under “Risk
      Factors” and elsewhere in this report.*




**Introductory
      Comment**




Throughout
      this Quarterly Report on Form 10-QSB, the terms “we,” “us,” “our,” and “our
      company” refer to Medical Discoveries, Inc., a Utah corporation, and, unless the
      context indicates otherwise, also includes our wholly owned subsidiary, MDI
      Oncology, Inc., a Delaware corporation.




**Overview** **.**




Prior
      to 2007, Medical Discoveries, Inc. was a developmental-stage bio-pharmaceutical
      company engaged in the research, validation, development and ultimate
      commercialization of two drugs. As more fully described in this report, during
      2007 the Board of Directors of our company determined that it could no longer
      fund the development of its two drug candidates and could not obtain additional
      funding for these drug candidates. Accordingly, the Board decided to sell the
      two drug candidates and to develop a new business in the rapidly expanding
      business of renewable alternative energy sources. As a result, our future
      business plan, and our current principal business activities include the
      planting, cultivation, harvesting and processing of inedible feedstock to
      generate feedstock seed oils and biomass for use in the biofuels industry,
      including the production of bio-diesel. Bio-diesel is a diesel-equivalent,
      processed fuel derived from biological sources (such as plant oils), which
      can
      be used in diesel engines.




15




**Organizational
      History** **.**




Medical
      Discoveries, Inc. was incorporated under the laws of the State of Utah on
      November 20, 1991. Effective as of August 6, 1992, the company merged with
      and
      into WPI Pharmaceutical, Inc., a Utah corporation (WPI), pursuant to which
      WPI
      was the surviving corporation. Pursuant to the MDI-WPI merger, the name of
      the
      surviving corporation was changed to Medical Discoveries, Inc. WPI was
      incorporated under the laws of the State of Utah on February 22, 1984 under
      the
      name Westport Pharmaceutical, Inc.




On
      March 22, 2005, we formed MDI Oncology, Inc., a Delaware corporation, as a
      wholly owned subsidiary to acquire certain intellectual property assets from
      the
      liquidation estate of Savetherapeutics, A.G.




In
      October 2007, we relocated our principal executive offices from 1338 S. Foothill
      Drive, #266, Salt Lake City, Utah 84108 to 6033 W. Century Blvd, Suite 1090,
      Los
      Angeles, California 90045. We intend to change our company’s name to “Global
      Clean Energy Holdings, Inc.” to reflect our new focus on the bio-diesel
      alternative energy market. Our telephone number is (310) 670-7911. During our
      transition to our new business, we maintain two websites at www.gceholdings.com
      and www.medicaldiscoveries.com. Our annual reports on Form 10-KSB, quarterly
      reports on Form 10-QSB, current reports on Form 8-K and amendments to such
      reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities
      and Exchange Act of 1934, as amended, and other related information are
      available, free of charge, on our website as soon as we electronically file
      those documents with, or otherwise furnish them to, the Securities and Exchange
      Commission. Our internet websites and the information contained therein, or
      connected thereto, are not and are not intended to be incorporated into this
      Quarterly Report on Form 10-QSB or any other Securities and Exchange Commission
      filing.




**Transition
      to new Business**




Until
      2007, we were a developmental-stage bio-pharmaceutical company engaged in the
      research, validation, development and ultimate commercialization of two drugs:
      MDI-P and SaveCream. MDI-P is a drug candidate that we were developing as an
      anti-infective treatment for bacterial infections, viral infections and fungal
      infections. SaveCream is a drug candidate that we were developing to reduce
      breast cancer tumors. Both of these drugs were under development and had not
      been approved by the U.S. Food and Drug Administration (“FDA”). The total cost
      to develop these two drugs and to receive the approval from the FDA would have
      cost many millions of dollars and taken many more years. In the past, we
      attempted to fund our development costs through the sale of equity securities,
      including the sale of our Series A Convertible Preferred Stock. To date, we
      have
      not generated significant revenues from operations or realized a
      profit.




Early
      in
      2007, our Board of Directors determined that we could no longer fund the
      development of our two drug candidates and that we could not obtain additional
      funding for these drug candidates. The Board noted that the commencement of
      human clinical trials of the MDI-P drug candidate was on Full Clinical Hold
      by
      the FDA under 21 CRF 312.42(b) and may not be initiated until deficiencies
      in
      our IND application are resolved to the FDA’s satisfaction. Our Board also
      evaluated the value of the SaveCream drug candidate that is currently being
      co-developed with Eucodis Pharmaceuticals Forschungs - und Entwicklungs GmbH,
      an
      Austrian company (“Eucodis”), and the return we could expect for our
      shareholders, and determined that the highest value for this drug candidate
      could be realized through a sale of that drug candidate to Eucodis. Accordingly,
      our Board sought to maximize the return from these assets through their sale.




On
      July
      6, 2007, we entered into an agreement with Eucodis to sell SaveCream for an
      aggregate of €4,007,534 (approximately U.S. $5,906,000 based on the currency
      conversion rate in effect as of November 30, 2007), which consideration is
      payable in cash and by the assumption of certain of our outstanding liabilities.
      The consummation of the sale of the SaveCream to Eucodis is contingent upon
      the
      approval of our shareholders, and we anticipate holding a special meeting of
      the
      shareholders in 2008 to approve the Eucodis after our pending proxy statement
      has been cleared for use by the SEC. On August 9, 2007, we sold the MDI-P
      compound for $310,000 in cash.




16




Having
      agreed to dispose of the foregoing assets, we considered entering into a number
      of other businesses that would enable us to provide our shareholders with future
      value. Our Board has decided to develop a business to produce and sell seed
      oils, including seed oils harvested from the planting and cultivation of *Jatropha
      curcas* plant,
      for the purpose of providing feedstock oil intended for the generation of methyl
      ester, otherwise known as bio-diesel (the “Jatropha Business”). Our Board
      concluded that there was a significant opportunity to participate in the rapidly
      growing biofuels industry, which previously was mainly driven by high priced,
      edible oil-based feedstocks. In order to commence our new Jatropha Business,
      effective September 1, 2007, we (i) hired Richard Palmer, an energy consultant,
      and a member of Global Clean Energy Holdings LLC (“Global”) to act as the our
      new President, Chief Operating Officer and future Chief Executive Officer,
      (ii)
      engaged Mobius Risk Group, LLC, a Texas company engaged in providing energy
      risk
      advisory services, to provide us with consulting services related to the
      development of the Jatropha Business, and (iii) acquired certain trade secrets,
      know-how, business plans, term sheets, business relationships, and other
      information relating to the cultivation and production of seed oil from the
      Jatropha plant for the production of bio-diesel from Global.




For
      additional details regarding the transactions we have entered into in connection
      with our new Jatropha Business, please see Note 6 - Subsequent Events to the
      condensed consolidated financial statements included in this Form 10-QSB for
      the
      quarter ended March 31, 2007.




**Critical
      Accounting Policies**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States require management to make estimates
      and
      assumptions that affect the reported assets, liabilities, sales and expenses
      in
      the accompanying financial statements. Critical accounting policies are those
      that require the most subjective and complex judgments, often employing the
      use
      of estimates about the effect of matters that are inherently uncertain. We
      are a
      development stage company as defined by the Financial Accounting Standards
      Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 7,
“Accounting and Reporting by Development Stage Enterprises.” Accordingly, all
      losses accumulated since inception have been considered as part of our
      development stage activities. Certain other critical accounting policies,
      including the assumptions and judgments underlying them, are disclosed in the
      Note A to the Consolidated Financial Statements included in our annual
      report on Form 10KSB filed for the fiscal year ended December 31, 2006. However,
      we do not believe that there are any alternative methods of accounting for
      our
      operations that would have a material affect on our financial
      statements.




**Results
      of Operations**




As
      discussed previously, during the three months ended March 31, 2007, the Board
      of
      Directors determined to discontinue our prior bio-pharmaceutical operations.
      Pursuant to accounting rules for discontinued operations, we have classified
      all
      revenue and expense for 2007 and prior periods related to the operations of
      our
      bio-pharmaceutical business as discontinued operations. Since all of our prior
      operations related to the bio-pharmaceutical business, all of our revenue and
      expense, with the exception of estimated general corporate overhead, has been
      reclassified into “Loss from Discontinued Operations” in the accompanying
      Condensed Consolidated Statements of Operations for all periods presented.




*Revenues
      and Gross Profit* .
      We are
      a development stage company and have not had significant revenues from our
      operations or reached the level of our planned operations. We have discontinued
      our prior bio-pharmaceutical operations during the three months ended March
      31,
      2007. Subsequent to March 31, 2007, we commenced operations in our new Jatropha
      business, but we are still in the pre-development agricultural stage of our
      operations and, therefore, do not anticipate generating significant revenues
      from the sale of bio-fuel products until 2009. We are, however, attempting
      to
      generate operating cash in 2008 from the forward sale of carbon credits and
      possibly from future oil delivery contracts. During
      the three months ended March 31, 2007, we recognized revenue of $200,000 related
      to our discontinued bio-pharmaceutical business, which revenue has been netted
      against expenses of discontinued operations and is included in Loss from
      Discontinued Operations in the accompanying Condensed Consolidated Statement
      of
      Operations .




17




*Operating
      Expenses* .
      Our
      general and administrative expenses related to continuing operations for the
      quarter ended March 31, 2007 were $251,327 compared to $89,835 for the
      quarter ended March 31, 2006. In 2007, general and administrative expense
      consists of general corporate overhead of $76,127 and share-based compensation
      of $175,200. In 2006, general and administrative expense principally consisted
      of estimated general corporate overhead. We have included expenses such as
      director fees, accounting costs, certain legal costs, certain consulting
      expenses, and an allocation of our one employee’s compensation as general
      corporate overhead. Other general and administrative expenses more directly
      related to the operation and disposal of our bio-pharmaceutical business have
      been included in Loss from Discontinued Operations.




We
      did
      not incur any research and development expenses for the quarter ended
      March 31, 2007 due to our Board of Directors’ decision to discontinue
      funding development of the SaveCream and MDI-P drug candidate assets. We
      incurred $92,583 in research and development expenses for the same period of
      2006, which is included in Loss from Discontinued Operations.




*Other
      Income/ Expense and Net Loss* .
      Our
      interest income decreased to $148 for the quarter ended March 31, 2007 from
      interest income of $1,211 in the same period of 2006 because of our decreased
      cash balances that we maintained in 2007.




During
      the quarter ended March 31, 2007, we recorded $194,019 as unrealized gain
      on financial instrument to record the accounting of warrants resulting from
      the
      issuance of the Series A Convertible Preferred Stock entered into in
      October 2004 and March 2005. During the same period of 2006, we had an
      unrealized loss as a result of the accounting for our warrants of $1,119,777.
      This non-cash gain/loss recognition is the result of the periodic revaluation
      of
      certain warrants classified as a liability in the financial
      statements.




Our
      Loss
      from Discontinued Operations was $355,693 for the three months ended March
      31,
      2006 compared to $109,163 for the same period in 2007. This factor, when
      considered with the non-cash loss of $1,119,777 resulting from the revaluation
      of certain warrants in the prior year, resulted in our net loss applicable
      to
      common shareholders for the first quarter of 2006 significantly exceeding our
      net loss of $174,063 for the quarter ended March 31, 2007.




**Liquidity
      And Capital Resources**




As
      of March 31, 2007, we had $137,385 in cash and had a working capital deficit
      of
      $5,404,268. Since our inception, we have financed our operations primarily
      through private sales of equity and debt financing. Accordingly, early in 2007
      we re-evaluated our future operations thereafter elected to terminate our
      bio-pharmaceutical operations.




In
      July 2007, we executed the Asset Sale Agreement with Eucodis pursuant to which
      we agreed to sell our SaveCream asset for an aggregate of €4,007,534
      (approximately $5,906,000 based on the currency conversion rate in effect as
      of
      November 30, 2007), a portion of which comprised (i) a cash payment of
€ 1,538,462 (approximately
      $2,267,000 based on the currency conversion rate in effect as of November 30,
      2007), which is due and payable to us at the closing, less $200,000 already
      received from Eucodis in March 2007 upon the signing of the Letter of Intent,
      and (b) Eucodis’ assumption of an aggregate of € 2,469,072 (approximately
      $3,639,000 based on the currency conversion rate in effect as of November 30,
      2007), constituting specific indebtedness currently owed to certain of our
      creditors. The sale is scheduled to close on or before January 31, 2008.




In
      August
      2007, we sold our second drug candidate, the MDI-P compound, for $310,000 in
      cash.




18




In
      order
      to fund ongoing operations pending closing of the sale to Eucodis, we entered
      into the Loan Agreement with, and issued a promissory note in favor of, Mercator
      Momentum Fund III, L.P. (“Mercator”). Pursuant to the loan agreement, Mercator
      made available to us a secured term credit facility in principal amount of
      $1,000,000. Initially, all loans under the credit facility became due and
      payable on December 14, 2007. As of December 13, 2007, $250,000 was outstanding
      under the credit facility. Mercator has agreed to extend the maturity date
      of
      this $250,000 loan to February 21, 2008. The foregoing loan is secured by a
      lien
      on all of our assets.




In
      November 2007, we issued 13,000 shares of our newly created Series B Convertible
      Preferred Stock to two accredited investors for an aggregate of
      $1,300,000.




We
      are
      currently funding our operations from the Mercator loan and from the proceeds
      of
      the sale of the Series B Convertible Preferred Stock. Assuming that the sale
      of
      SaveCream to Eucodis is completed in early 2008, we intend to use the net
      proceeds from that sale to fund our operating expenses, and pay $500,000 due
      to
      our transitional Chief Executive Officer under a certain release and settlement
      agreement. However, our business plan calls for significant infusion of
      additional capital to establish our Jatropha plantations in Mexico and other
      locations. We currently do not have the funds necessary to acquire and cultivate
      those plantations, nor will the projected proceeds from the Eucodis sale be
      sufficient for those purposes. Accordingly, in addition to the proceeds we
      expect to receive upon the sale of SaveCream to Eucodis, we will have to obtain
      significant additional capital through the sale of additional equity and/or
      debt
      securities, the forward sale of Jatropha oil and carbon offset credits, and
      from
      other financing activities, such as strategic partnerships. While we have
      commenced negotiations with third parties to obtain additional funding from
      strategic partnerships and for the sale of carbon credits, no assurance can
      be
      given that we will have sufficient capital available to continue to operate
      our
      business in 2008 or that we will be able to effect our new business plan in
      the
      Jatropha Business.




We
      have
      no off-balance sheet arrangements as defined in Item 303(c) of Regulation
      S-B.




**RISK
      FACTORS**




**Risks
      Relating to Our Business**




*We
      have no direct operating history in the feedstock and bio-diesel industries,
      which makes it difficult to evaluate our financial position and our business
      plan.*





To
      date,
      we have been a development stage bio-pharmaceutical company. Since our inception
      through December 31, 2006, we generated only $957,000 of revenues and
      accumulated net losses of over $22 million. During 2007, we terminated our
      operations as a bio-pharmaceutical company and have commenced developing a
      new
      business in the biofuels industry. However, since we have only recently
      commenced our operations as a biofuels company, we have no operating history
      in
      that line of business on which a decision to invest in our company can be based.
      The future of our company currently is dependent upon our ability to implement
      our new business plan in the Jatropha Business. While we believe that our
      business plan, if implemented as drafted, will make our company successful,
      we
      have no operating history against which we can test our plans and assumptions,
      and therefore cannot evaluate the likelihood of success.





*The
      Jatropha Business that we are commencing is a new and highly risky business
      that
      has not been conducted on a similar scale in North America.*





Our
      business plan calls for a large scale planting and harvesting of Jatropha
      plants, primarily outside of the United States, and for the subsequent
      production and sale of Jatropha oil (and other Jatropha byproducts) for use
      as a
      biofuel primarily in the United States. We are commencing a new business and
      will be subject to all of the risks normally associated with new businesses,
      including risks related to the large scale production of plants that have not
      heretofore been grown in large scale plantations, logistical issues related
      to
      the oil and biomass produced at such new plantations, market acceptance,
      uncertain pricing of our products, developing governmental regulations, and
      the
      lack of an established market for our products.




19





*Since
      we currently have a limited amount of cash available, and are not generating
      any
      revenues from either our legacy bio-pharmaceutical business or our new Jatropha
      Business, we are dependent upon the sales proceeds to be derived from the sale
      of SaveCream, the sale of Carbon Credit purchase contracts, future delivery
      Jatropha oil purchase contracts, and on our ability to raise additional funds
      to
      continue our operations and existence.*




We
      currently only have a limited amount of cash available, which cash is not
      sufficient to fund our anticipated future operating needs beyond the first
      quarter of 2008. In addition, neither our legacy bio-pharmaceutical business,
      nor our new Jatropha Business currently generate any revenues from which we
      can
      pay our administrative and operating expenses. We currently anticipate that
      we
      will receive approximately $2,067,000 in cash based on the currency conversion
      rate in effect as of November 30, 2007 upon the sale of our SaveCream rights
      to
      Eucodis (in addition to being relieved of our obligation to pay approximately
      $3,639,000 of currently outstanding liabilities). The closing of the SaveCream
      sale is currently scheduled to occur at the end of January 2008, and we
      currently have sufficient funds to operate until that date. However, in the
      event that the closing of the SaveCream assets is delayed or does not occur,
      we
      will face an immediate cash shortage, and may not be able to fund our
      anticipated operating expenses after February 2008. No assurance can be given
      that the SaveCream sale will occur, or that it will occur during the time period
      we anticipate.




We
      will
      continue to incur administrative and general operating expenses without revenues
      until we begin selling Jatropha oil, or until we complete the sales of carbon
      credit purchase contracts. Based on our current monthly operating expenses
      and
      our projected future operating expenses, even if the SaveCream sale closes
      as
      planned, we will need to obtain significant additional funding during 2008
      to
      continue our operations and meet our business plan objectives. Such additional
      funds could be obtained from the sale of equity, from forward purchase payments
      for our products, or debt financing. There can be no assurance that we will
      be
      able to obtain the capital we require, or obtain such capital on terms that
      are
      commercially favorable for us. In the event that we do not obtain additional
      funding in the near future, we may not be able to maintain our current
      operations and will not be able to implement our business plan.




In
      addition, our Jatropha Business will require that we acquire and cultivate
      a
      large amount of land and otherwise incur significant initial start-up expenses
      related to establishing the Jatropha plantations required for our proposed
      business. We currently do not have the capital that is necessary to acquire
      the
      land or to otherwise fund the large up-front expenses, nor has any entity agreed
      to provide us with such funds. Accordingly, the success of our new Jatropha
      Business is contingent on, among other things, our ability to raise the
      necessary capital to fund our planned Jatropha Business expenditures.
      Historically, we have raised capital through the issuance of debt and equity
      securities. However, given the risks associated with a new, untested biofuels
      business, the risks associated with our common stock (as discussed below),
      and
      our status as a small, unknown public company, we cannot guarantee that we
      will
      be able to raise capital, or if we are able to raise capital, that such capital
      will be in the amounts needed. Our failure to raise capital, when needed and
      in
      sufficient amounts, will severely impact our ability to develop our Jatropha
      Business.




*Our
      business could be significantly impacted by changes in government regulations
      over energy policy.*




Our
      planned operations and the properties we intend to cultivate are subject to
      a
      wide variety of federal, provincial and municipal laws and regulations,
      including those governing the use of land, type of development, use of water,
      use of chemicals for fertilizer, pesticides, export or import of various
      materials including plants, oil, use of biomass, handling of materials, labor
      laws, storage handling of materials, shipping, and the health and safety of
      employees. As such, the nature of our operations exposes us to the risk of
      claims with respect to such matters and there can be no assurance that material
      costs or liabilities will not be incurred in connection with such claims. In
      addition, these governmental regulations, both in the U.S. and in the foreign
      countries in which we may conduct our business, may restrict and hinder our
      operations and may significantly raise our cost of operations. Any breach by
      our
      company of such legislation may also result in the suspension or revocation
      of
      necessary licenses, permits or authorizations, civil liability and the
      imposition of fines and penalties, which would adversely affect our ability
      to
      operate and our financial condition.




20




Further,
      there is no assurance that the laws, regulations, policies or current
      administrative practices of any government body, organization or regulatory
      agency in the United States or any other jurisdiction, will not be changed,
      applied or interpreted in a manner which will fundamentally alter the ability
      of
      our company to carry on our business. The actions, policies or regulations,
      or
      changes thereto, of any government body or regulatory agency, or other special
      interest groups, may have a detrimental effect on our company. Any or all of
      these situations may have a negative impact on our operations.




*Our
      future growth is dependent upon strategic relationships within the feedstock
      and
      bio-diesel industries. If we are unable to develop and maintain such
      relationships, our future business prospects could be significantly
      limited.*




Our
      future growth will generally be dependent on relationships with third parties,
      including alliances with feedstock oil and bio-diesel processors and
      distributors. In addition, we will likely rely on third parties to oversee
      the
      operations and cultivation of the Jatropha plants in our non-U.S. properties.
      Accordingly, our success will be significantly dependent upon our ability to
      establish successful strategic alliances with third parties and on the
      performance of these third parties. These third parties may not regard their
      relationship with us as important to their own business and operations, and
      there is no assurance that they will commit the time and resources to our joint
      projects as is necessary, or that they will not in the future reassess their
      commitment to our business. Furthermore, these third parties may not perform
      their obligations as agreed. In the event that a strategic relationship is
      discontinued for any reason, our business, results of operations and financial
      condition may be materially adversely affected.




*We
      will depend on key service providers for assistance and expertise in beginning
      operations and any failure or loss of these relationships could delay our
      operations, increase our expenses and hinder our success.*




Because
      of our limited financial and personnel resources, and because our Jatropha
      plantations are expected to be established primarily outside of the United
      States, we will have to establish and maintain relationships with several key
      service providers for land acquisition, the development and cultivation of
      Jatropha plantations, labor management, the transportation of Jatropha oil
      and
      biomass, and other services. We have already established such a relationship
      with the Lodemo Group in Mexico concerning the cultivation and management of
      our
      Jatropha nurseries and plantations in Mexico and the transportation of our
      products. Accordingly, our ability to develop our Jatropha Business in Mexico,
      and our success in Mexico, will to a large extent be dependent upon the efforts
      and services of the Lodemo Group. While the Lodemo Group has significant
      experience in diesel distribution and sales, liquids transportation, logistics,
      land development and agriculture, no assurance can be given that our joint
      operations with the Lodemo Group will be successful or that we will be able
      to
      achieve our goals in Mexico.




*A
      significant decline in the price of oil could have an adverse impact in our
      profitability.*




Our
      success is dependent in part to the current high price of crude oil and on
      the
      high price of seed oils that are currently used to manufacture bio-diesel.
      A
      significant decline in the price of either crude oil or the alternative seed
      oils will have a direct negative impact on our financial performance
      projections.




*There
      are risks associated with conducting our business operations in foreign
      countries, including political and social unrest.*




Our
      proposed agricultural operations will be primarily located in foreign countries,
      beginning in Mexico. Accordingly, we are subject to risks not typically
      associated with ownership of U.S. companies and therefore should be considered
      more speculative than investments in the U.S.




21




Mexico
      is
      a developing country that has experienced a range of political, social and
      economic difficulties over the last decade. Our operations could be affected
      in
      varying degrees by political instability, social unrest and changes in
      government regulation relating to foreign investment, the biofuels industry,
      and
      the import and export of goods and services. Operations may also be affected
      in
      varying degrees by possible terrorism, military conflict, crime, fluctuations
      in
      currency rates and high inflation.




In
      addition, Mexico has a nationalized oil company, and there can be no assurance
      that the government of Mexico will continue to allow our business and our assets
      to compete in any way with their interests. Our operations could be adversely
      affected by political, social and economic unrest in Mexico and the other
      foreign countries we plan for commence agricultural operations.




*The
      cost of developing and operating our agricultural projects significantly exceeds
      our current financial.*




Our
      preliminary budget contemplates the cultivation of 20,000-hectare of Jatropa
      in
      Mexico. According to our business plan, this will be the first of several other
      large plantations used in our feedstock/biofuel operations. In addition, we
      will
      have to construct a plant nursery and research facility as well as an seed
      oil
      extraction facility. We currently do not have the funds necessary to fund our
      planned operations. Unless we are able to obtain the necessary funds on
      economically viable terms, our Jatropha Business will not succeed, and we will
      not be able to meet our business goals. In addition, even if we obtain the
      initial funds necessary to establish our plantation and facilities, the costs
      to
      develop and implement our proposed plantation and support facilities, and our
      other operational costs could significantly increase beyond our expectations
      due
      to economic factors, design modifications, implementation or construction delays
      or cost overruns. In such an event, our profitability and ultimately the
      financial condition of our company will be adversely affected.




*We
      plan to grow rapidly and our inability to keep up with such growth may adversely
      affect our profitability.*




We
      plan
      to grow rapidly and significantly expand our operations. This growth will place
      a significant strain on our management team and other company resources. We
      will
      not be able to implement our business strategy in a rapidly evolving market
      without effective planning and management processes. We have a short operating
      history and have not implemented sophisticated managerial, operational and
      financial systems and controls. We are required to manage multiple relationships
      with various strategic partners, including suppliers, distributors, and other
      third parties. To manage the expected growth of our operations and personnel,
      we
      will have to significantly supplement our existing managerial, financial and
      operational staff, systems, procedures and controls. We may be unable to
      supplement and complete, in a timely manner, the improvements to our systems,
      procedures and controls necessary to support our future operations, our
      operations will not function effectively. In addition, our management may be
      unable to hire, train, retain, motivate and manage required personnel, or
      successfully identify, manage and exploit existing and potential market
      opportunities. As a result, our business and financial condition may be
      adversely affected.




*Our
      business will not be diversified because we will be primarily concentrated
      in
      one industry. As a consequence, we may not be able to adapt to changing market
      conditions or endure any decline in the bio-diesel industry.*




We
      expect
      our business to consist primarily of sales of feedstock oil harvested from
      the
      Jatropha plant, and bio-diesel production and sales. We do not have any other
      lines of business or other sources of revenue to rely upon if we are unable
      to
      produce and sell feedstock oil and bio-diesel, or if the markets for such
      products decline. Our lack of diversification means that we may not be able
      to
      adapt to changing market conditions or to withstand any significant decline
      in
      the bio-diesel industry.




*Reductions
      in the price of bio-diesel, and decreases in the price of petroleum-based fuels
      could affect the price of our feedstock, resulting in reductions in our actual
      revenues.*




22





Historically,
      bio-diesel prices have been highly correlated to the Ultra Low Sulfur (“ULS”)
      diesel prices. Increased volatility in the crude oil market has an effect on
      the
      stability and long-term predictability of ULS diesel, and hence the biofuels
      prices in the domestic and international markets. Crude oil prices are impacted
      by wars and other political factors, economic uncertainties, exchange rates
      and
      natural disasters. A reduction in petroleum-based fuel prices may have an
      adverse effect on bio-diesel prices and could apply downward pressure on
      feedstock, affecting revenues and profits in the feedstock industry, which
      could
      adversely affect our financial condition.




*There
      are several agreements and relationships that remain to be negotiated, executed
      and implemented which will have a critical impact on our operations, expenses
      and profitability.*




We
      have
      several agreements, documents and relationships that remain to be negotiated,
      executed and implemented before we can develop fully commence our new
      operations, including agreements relating to the construction of our proposed
      seed processing plant and other support facilities for our Jatropha plantation
      in Mexico. In some cases, the parties with whom we would need to establish
      a
      relationship have yet to be identified. Our expectations regarding the likely
      terms of these agreements and relationships could vary greatly from the terms
      of
      any agreement or relationship that may eventually be executed or established.
      If
      we are unable to enter into these agreements or relationships on satisfactory
      terms, or if revisions or amendments to existing terms become necessary, the
      construction of our proposed seed processing plant and the commencement of
      our
      related operations could be delayed, our expenses could be increased and our
      profitability could be adversely affected and the value of your investment
      could
      decline.




*Delays
      due to, among others, weather, labor or material shortages, permitting or zoning
      delays, or opposition from local groups, may hinder our ability to commence
      operations in a timely manner.*




Our
      development schedule assumes the commencement of planting in the first quarter
      of 2008, with oil production anticipated 18 months thereafter. We could incur
      delays in the implementation of that plan or the construction of support
      facilities due to permitting or zoning delays, opposition from local groups,
      adverse weather conditions, labor or material shortages, or other causes. In
      addition, changes in political administrations at the federal, state or local
      level that result in policy changes towards the large scale cultivation of
      Jatropha or towards biofuels in general could result in delays in our timetable
      for development and commencement of operations. Any such delays could adversely
      affect our ability to commence operations and generate revenue.




*We
      may be unable to locate suitable properties and obtain the development rights
      needed to build and expand our business.*




Our
      business plan focuses on identifying and developing agricultural properties
      (plantations, nurseries, etc.) for the production of biofuels feedstock. The
      availability of land for this activity is key to our projected revenue and
      profitability. Our ability to acquire appropriate land in the future is
      uncertain and we may be required to delay planting, which may create
      unanticipated costs and delays. In the event that we are not successful in
      identifying and obtaining rights on suitable land for our agricultural and
      processing facilities, our future prospects for profitability will likely be
      affected, and our financial condition and resulting operations may be adversely
      affected.




*Technological
      advances in feedstock oil production methods in the bio-diesel industry could
      adversely affect our ability to compete and the value of your investment.*




Technological
      advances could significantly decrease the cost of producing feedstock oil and
      biofuels. There is significant research and capital being invested in
      identifying more efficient processes, and lowering the cost of producing
      feedstock oil and biofuels. We expect that technological advances in feedstock
      oil/biofuel production methods will continue to occur. If improved technologies
      become available to our competitors, they may be able to produce feedstock
      oil,
      and ultimately biofuels, at a lower cost than us. If we are unable to adopt
      or
      incorporate technological advances into our operations, our ability to compete
      effectively in the feedstock/biofuels market may be adversely affected, which
      in
      turn will affect our profitability.




23




*The
      development of alternative fuels and energy sources may reduce the demand for
      biofuels, resulting in a reduction in our profitability.*




Alternative
      fuels, including a variety of energy alternatives to biofuels, are continually
      under development. Technological advances in fuel-engines and exhaust system
      design and performance could also reduce the use of biofuels, which would reduce
      the demand for bio-diesel. Further advances in power generation technologies,
      based on cleaner hydrocarbon based fuels, fuel cells and hydrogen are actively
      being researched and developed. If these technological advances and alternatives
      prove to be economically feasible, environmentally superior and accepted in
      the
      marketplace, the market for biofuels could be significantly diminished or
      replaced, which would adversely affect our financial condition.




*Our
      ability to hire and retain key personnel and experienced consultants will be
      an
      important factor in the success of our business and a failure to hire and retain
      key personnel may result in our inability to manage and implement our business
      plan.*




We
      are
      highly dependent upon our management, and on the consulting services provided
      to
      us by Mobius Risk Group, LLC, a company we have retained to provide us with
      consulting services related to the development of our Jatropha Business. The
      loss of the services of one or more of these individuals or of Mobius may impair
      management's ability to operate our company. We have not purchased key man
      insurance on any of our officers, which insurance would provide us with
      insurance proceeds in the event of their death. Without key man insurance,
      we
      may not have the financial resources to develop or maintain our business until
      we could replace such individuals or to replace any business lost by the death
      of such individuals. We may not be able to attract and retain the necessary
      qualified personnel. If we are unable to retain or to hire qualified personnel
      as required, we may not be able to adequately manage and implement our
      business.




*Our
      operating costs could be higher than we expect, and this could reduce our future
      profitability.*




In
      addition to general economic conditions, market fluctuations and international
      risks, significant increases in operating, development and implementation costs
      could adversely affect our company due to numerous factors, many of which are
      beyond our control. These increases could arise for several reasons, such
      as:




·
            Increased
                cost for land acquisition;


·
            Increased
                unit costs of labor for nursery, field preparation and
                planting;


·
            Increased
                costs for construction of
                facilities;


·
            Increased
                transportation costs for required nursery and field workers;


·
            Increased
                costs of supplies and sub-contacted labor for preparing of land for
                planting;


·
            Increase
                costs for irrigation, soil conditioning, soil maintenance;
                or


·
            Increased
                time for planting and plant care and
                custody.





Upon
      completion of our field developments, our operations will also subject us to
      ongoing compliance with applicable governmental regulations, including those
      governing land use, water use, pollution control, worker safety and health
      and
      welfare and other matters. We may have difficulty complying with these
      regulations and our compliance costs could increase significantly. Increases
      in
      operating costs would have a negative impact on our operating income, and could
      result in substantially decreased earnings or a loss from our operations,
      adversely affecting our financial condition.




*Fluctuations
      in the Mexican peso to U.S. dollar exchange rate may adversely affect our
      reported operating results.*




The
      Mexican peso is the primary operating currency for our initial business
      operations while our financial results are reported in U.S. dollars. Because
      our
      costs will be primarily denominated in pesos, a decline in the value of the
      dollar to the peso could negatively affect our actual operating costs in U.S.
      dollars, and our reported results of operations. We do not currently engage
      in
      any currency hedging transactions intended to reduce the effect of fluctuations
      in foreign currency exchange rates on our results of operations. We cannot
      guarantee that we will enter into any such currency hedging transactions in
      the
      future or, if we do, that these transactions will successfully protect us
      against currency fluctuations.




24




*Risk
      of abandoned operations or decommissioning costs are unknown and may be
      substantial.*





We
      may be responsible for costs associated with abandoning land development and
      product processing facilities, which we intend to use for production of biofuels
      feedstock. We expect to have long term commitments on land and facilities and
      short to medium commitments for labor and other services. Abandonment of these
      developments and contracts and the associated decommissioning costs could be
      substantial and may have an effect on future profitability.




*Our
      future profitability is dependent upon many natural factors outside of our
      control. If these factors do not produce favorable results our future business
      profitability could be significantly affected.*





Our
      future profitability ** is
      mainly
      dependent on the production output from our agricultural operations. There
      are
      many factors that can effect growth and fruit production of the Jatropha plant
      including weather, nutrients, pests and other natural enemies of the plant.
      Many
      of these are outside of our direct control and could be devastating to our
      operations.


*The
        biofuel production industry is extremely competitive. Many of our competitors
        have greater financial and other resources than we do and one or more of
        these
        competitors could use their greater resources to gain market share at our
        expense.*
  The
        biofuels production industry is extremely competitive. Many of our significant
        competitors in the industry have substantially greater production, financial,
        research and development, personnel and marketing resources than we do. As
        a
        result, our competitors may be able to compete more aggressively than we
        could
        and sustain that competition over a longer period of time. Our lack of resources
        relative to many of our significant competitors may cause us to fail to
        anticipate or respond adequately to new developments and other competitive
        pressures. This failure could reduce our competitiveness and cause a decline
        in our market share, sales and profitability.




**Risks
      Relating to Our Common Stock**




*Our
      stock is thinly traded, so you may be unable to sell your shares at or near
      the
      quoted bid prices if you need to sell a significant number of your
      shares.*





The
      shares of our common stock are thinly-traded on the Pink Sheets LLC electronic
      trading platform, meaning that the number of persons interested in purchasing
      our common shares at or near bid prices at any given time may be relatively
      small or non-existent. This situation is attributable to a number of factors,
      including the fact that we are a small company which is relatively unknown
      to
      stock analysts, stock brokers, institutional investors and others in the
      investment community that generate or influence sales volume, and that even
      if
      we came to the attention of such persons, they tend to be risk-averse and would
      be reluctant to follow an unproven, early stage company such as ours or purchase
      or recommend the purchase of our shares until such time as we became more
      seasoned and viable. As a consequence, there may be periods of several days
      or
      more when trading activity in our shares is minimal or non-existent, as compared
      to a seasoned issuer which has a large and steady volume of trading activity
      that will generally support continuous sales without an adverse effect on share
      price. We cannot give you any assurance that a broader or more active public
      trading market for our common shares will develop or be sustained, or that
      current trading levels will be sustained. Due to these conditions, we can give
      you no assurance that you will be able to sell your shares at or near bid prices
      or at all if you need money or otherwise desire to liquidate your shares.




*Our
      existing directors, officers and key employees hold a substantial amount of
      our
      common stock and may be able to prevent other shareholders from influencing
      significant corporate decisions.* **




As
      of December 11, 2007, our directors and executive officers beneficially owned
      approximately 35.11% of our outstanding common stock. These shareholders, if
      they act together, may be able to direct the outcome of matters requiring
      approval of the shareholders, including the election of our directors and other
      corporate actions such as:




·
            our
                merger with or into another company;




·
            a
                sale of substantially all of our assets; and




·
            amendments
                to our articles of incorporation.




25




The
      decisions of these shareholders may conflict with our interests or those of
      our
      other shareholders.




*The
      market price of our stock may be adversely affected by market
      volatility.*





The
      market price of our common stock is likely to be volatile and could fluctuate
      widely in response to many factors, including:




·
            fluctuation
                in the world price of crude oil;




·
            market
                changes in the biofuels industry;




·
            government
                regulations affecting renewable energy businesses and
                users;




·
            actual
                or anticipated variations in our operating
                results;




·
            our
                success in meeting our business goals and the general development
                of our
                proposed operations;




·
            general
                economic, political and market conditions in the U.S. and the foreign
                countries in which we plan to operate;
                and




·
            the
                occurrence of any of the risks described in this Quarterly
                Report.




*Obtaining
      additional capital though the sale of common stock will result in dilution
      of
      shareholder interests.*




We
      plan
      to raise additional funds in the future by issuing additional shares of common
      stock or other securities, which may include securities such as convertible
      debentures, warrants or preferred stock that are convertible into common stock.
      Any such sale of common stock or other securities will lead to further dilution
      of the equity ownership of existing holders of our common stock. Additionally,
      the existing options, warrants and conversion rights may hinder future equity
      offerings, and the exercise of those options, warrants and conversion rights
      may
      have an adverse effect on the value of our stock. If any such options, warrants
      or conversion rights are exercised at a price below the then current market
      price of our shares, then the market price of our stock could decrease upon
      the
      sale of such additional securities. Further, if any such options, warrants
      or
      conversion rights are exercised at a price below the price at which any
      particular shareholder purchased shares, then that particular shareholder will
      experience dilution in his or her investment.




*We
      are unlikely to pay dividends on our common stock in the foreseeable
      future.*




We
      have
      never declared or paid dividends on our stock. We currently intend to retain
      all
      available funds and any future earnings for use in the operation and expansion
      of our business. We do not anticipate paying any cash dividends in the
      foreseeable future, and it is unlikely that investors will derive any current
      income from ownership of our stock. This means that your potential for economic
      gain from ownership of our stock depends on appreciation of our stock price
      and
      will only be realized by a sale of the stock at a price higher than your
      purchase price.




*Trading
      of our stock may be restricted by the Securities and Exchange Commission's
      penny
      stock regulations, which may limit a shareholder's ability to buy and sell
      our
      stock.*




The
      Securities and Exchange Commission has adopted regulations which generally
      define “penny stock” to be any equity security that has a market price less than
      $5.00 per share or an exercise price of less than $5.00 per share, subject
      to
      certain exceptions. Our securities are covered by the penny stock rules, which
      impose additional sales practice requirements on broker-dealers who sell to
      persons other than established customers and “accredited investors”. The term
“accredited investor” refers generally to institutions with assets in excess of
      $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
      income exceeding $200,000 or $300,000 jointly with their spouse. The penny
      stock
      rules require a broker-dealer, prior to a transaction in a penny stock not
      otherwise exempt from the rules, to deliver a standardized risk disclosure
      document in a form prepared by the Securities and Exchange Commission, which
      provides information about penny stocks and the nature and level of risks in
      the
      penny stock market. The broker-dealer also must provide the customer with
      current bid and offer quotations for the penny stock, the compensation of the
      broker-dealer and its salesperson in the transaction and monthly account
      statements showing the market value of each penny stock held in the customer's
      account. The bid and offer quotations, and the broker-dealer and salesperson
      compensation information, must be given to the customer orally or in writing
      prior to effecting the transaction and must be given to the customer in writing
      before or with the customer's confirmation. In addition, the penny stock rules
      require that prior to a transaction in a penny stock not otherwise exempt from
      these rules, the broker-dealer must make a special written determination that
      the penny stock is a suitable investment for the purchaser and receive the
      purchaser's written agreement to the transaction. These disclosure requirements
      may have the effect of reducing the level of trading activity in the secondary
      market for the stock that is subject to these penny stock rules. Consequently,
      these penny stock rules may affect the ability of broker-dealers to trade our
      securities. We believe that the penny stock rules discourage investor interest
      in and limit the marketability of our common stock.




26




**ITEM
      3.**  **CONTROLS
      AND PROCEDURES** .




*Evaluation
      of Disclosure Controls and Procedures.*





We
      maintain disclosure controls and procedures which are designed to ensure that
      the information required to be disclosed in the reports it files or submits
      under the Securities Exchange Act of 1934 (as amended, the “Act”) is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms, and that such information is accumulated and communicated
      to our management, including the Chief Executive Officer (“Certifying Officer”),
      to allow timely decisions regarding required financial disclosures.




In
      connection with the preparation of this Quarterly Report, our Certifying Officer
      evaluated the effectiveness of management’s disclosure controls and procedures,
      as of March 31, 2007, in accordance with Rules 13a-15(b) and 15d-15(b) of the
      Exchange Act. Based on that evaluation, the Certifying Officer concluded that
      management’s disclosure controls and procedures were not effective as of March
      31, 2007.




As
      a result of our lack of working capital and insufficient personnel, we were
      unable to timely file our interim quarterly report for the period ending March
      31, 2007 as required under the Act.




*Material
      Weakness in Internal Control Over Financial Reporting*




Subject
      to oversight by the Audit Committee, management is responsible for establishing
      and maintaining adequate internal control over our financial reporting as
      defined in Exchange Act Rule 13a-15(f). The internal control over financial
      reporting is a process designed to provide reasonable assurance regarding the
      reliability of financial reporting, and the preparation of financial statements
      for external purposes in accordance with generally accepted accounting
      principles (“GAAP”) in the United States of America. Because of its inherent
      limitations, internal control over financial reporting may not prevent or detect
      misstatements.




A
      material weakness is a control deficiency, or combination of control
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected. Based on the evaluation performed by them, for the reasons set
      forth below, our Chief Executive Officer concluded that our disclosure controls
      and procedures were not effective as of March 31, 2007. The material weakness
      resulted from our financial condition at the end of fiscal 2006, which caused
      us
      to have inadequate staffing of the accounting functions. In addition, as of
      March 31, 2007, we did not have a Chief Financial Officer.




27




During
      September 2007, our Audit Committee conducted an investigation into the
      foregoing internal control deficiencies. As a result of the investigation,
      under
      the direction of the Audit Committee, management is in the process of developing
      and implementing additional measures designed to ensure that information
      required to be disclosed in our periodic reports is recorded, processed,
      summarized and reported accurately. These measures include:




·
            We
                have retained Gilderman, Garabedian & Flummerfelt, LLP, an independent
                accounting firm, to manage our day-to-day internal accounting
                functions;




·
            We
                have retained Osborne, Robbins & Buhler, PLLC, an independent
                accounting firm, to assist us with the preparation of our financial
                reports to be included in our period reports required to be filed
                under
                the Act;




·
            We
                have consolidated all or our record keeping and accounting functions
                in
                our Los Angeles office;




·
            We
                have develop and implemented improved accounting and management financial
                reporting policies and procedures;




·
            We
                have hired ADP, Inc., an outside payroll service, to process all
                payrolls
                and make the required payroll withholding deductions and deposits;
                and,




·
            We
                have implemented additional banking procedures and imposed additional
                pre-approval authorization
                policies.




Our
      Board of Directors believes that, with the additional measures we have adopted
      since October 1, 2007, our system of internal controls, disclosure controls
      and
      procedures will improve, and be adequate to provide reasonable assurance that
      the information required to be disclosed in the our interim and annual reports
      is recorded, processed, summarized, and accurately reported within the time
      periods specified in the SEC’s rules and forms, and that such information is
      accumulated and communicated to our Board of Directors, the Audit Committee,
      management, including our certifying officers, as appropriate, to allow for
      timely decisions regarding required disclosure based closely on the definition
      of “disclosure controls and procedures” in Rule 13a-15(e). The Audit Committee
      cannot be certain that its remediation efforts will sufficiently cure
      management’s identified material financial reporting weaknesses. Furthermore,
      the Audit Committee has not tested the operating effectiveness of the remediated
      controls, since the process is not yet complete. However, because of the
      inherent limitations in all control systems, no evaluation of controls can
      provide absolute assurance that all control issues, if any, within our company
      have been detected. These inherent limitations include the realities that
      judgments in decision-making can be faulty, and that breakdowns can occur
      because of simple errors or mistakes.




**PART
      II**




**ITEM
      1.**  **LEGAL
      PROCEEDINGS** .




Please
      refer to our Annual Report on Form 10-KSB, for the fiscal year ended December
      31, 2006, filed with the Securities and Exchange Commission (“SEC”) on December
      11, 2007 for a description of our current legal proceedings. There have been
      no
      material developments with respect to any of the legal proceedings described
      in
      our previously filed Annual Report on Form 10-KSB.




**ITEM
      2.**  **UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS** .




In
      February 2007, we entered into a consulting agreement (“Consulting
      Agreement”)
      with Emmes Group Consulting LLC (“Emmes”)
      to assist in resolving
      our financial issues and provide advice regarding any strategic alternatives
      that may be available to us. Pursuant to the Consulting Agreement, we issued
      to
      Emmes a warrant to purchase 5,000,000 shares of our common stock. The warrant
      has an exercise price of $0.03 per share, contains a cash-less exercise
      provision, and expires ten years from date of issue.




In
      February 2007, we entered into a consulting
      agreement with Valerie A. Heusinkveld to assist with our SEC reporting
      obligations, including the preparation of financial statements. As compensation
      for the services, we issued to Ms. Heusinkveld a warrant to purchase 5,000,000
      shares of our common stock. The warrant has an exercise price of $0.03 per
      share, contains a cash-less exercise provision, and expires ten years from
      date
      of issue.


The
        issuance of the foregoing securities was exempt under Section 4(2) of the
        Securities Act of 1933, as amended.




**ITEM
      3.**  **DEFAULTS
      UPON SENIOR SECURITIES** .




None.


28




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




None.




**ITEM
      5.**  **OTHER
      INFORMATION**




None.




**ITEM
      6.**  **EXHIBITS**




10.13
            
            Consulting
                Agreement, effective as of February 1, 2007, by and between Medical
                Discoveries, Inc. and Valerie A. Heusinkveld*10.14
            
            Consulting
                Agreement, effective as of February 1, 2007, by and between Medical
                Discoveries, Inc. and Emmes Group Consulting LLC*31
            
            Rule
                13a-14(a) Certification, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002 *32
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002*




*
              Filed
                  herewith.




29




**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.


MEDICAL
                DISCOVERIES, INC.Date:
              December 19, 2007
            By:
            /s/ JUDY
              ROBINETTJudy
              RobinettChief
                Executive Officer and interim Chief Financial
              Officer




30