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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 Form 10-QSB/A (Mark One) [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the quarterly period ended March 31, 2004
 [   ]
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACTFor the transition period from 
to
 Commission file number 0-12627 MEDICAL DISCOVERIES, INC.    Utah
    
    87-0407858(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 738 Aspenwood Lane, Twin Falls, Idaho 83301 
  (208) 736-1799 
  N/A 
  APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date: As of May 12, 2004, there
were 90,291,185 shares of the issuers Common Stock outstanding. Transitional Small Business Disclosure Format (check one): Yes [  ] No [X] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): Yes [  ] No [X]




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TABLE OF CONTENTS Explanatory Note The purpose of this amendment
on Form 10-QSB/A
to the Quarterly Report on Form 10-QSB of Medical Discoveries, Inc. for the quarter ended
March 31, 2004 is to restate our interim consolidated financial statements for the quarter ended
 March 31, 2004 and related disclosures as of and for the
quarter ended March 31, 2004.
 Generally, no attempt has been made in this Form 10-QSB/A to modify or update other
 disclosures presented in the original report on Form 10-QSB except
as required to reflect the effects of the restatement. The Form 10-QSB/A generally
does not reflect events occurring after the filing of the Form 10-QSB or modify or update those disclosures, including
the exhibits to the Form 10-QSB, affected by subsequent events. Information not affected by the restatement is unchanged and reflects
the disclosures made at the time of the original filing of the
 Form 10-QSB on May 17, 2004. Accordingly, this Form 10-QSB/A should be
read in conjunction with our filings made with the Securities and
Exchange Commission subsequent to the filing of the original
Form 10-QSB, including any
amendments to those filings. The following items have been amended as a result of the restatement: Part I  Item 1.
Financial Statements
Part I  Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations
Part II  Item 2. Changes in Securities There are two principal changes in the restatement. The first is to
correct our disclosure relating to extension of certain options. We initially reported that due to a change
in the expiration date of certain options, the options would be subject to variable accounting treatment. We have
since determined that the options are not subject to variable accounting treatment, but rather a remeasurement of the options as if they
were newly granted. See Note 1 to the Consolidated Financial Statements for a further explanation. The second is to correct an error in the
cumulative net loss from inception to date as reflected on the
Statements of Operations. While we previously reported the correct
cumulative net loss on the Statements of Cash Flows, the same figure
as reported on the Statements of Operations was erroneous based on an apparent incorrect calculation
in 1999, which error had been carried forward. We do not believe the difference to be material, but have elected to
correct this error in the 2003 10-KSB and subsequent filings. In addition to the two principal changes outlined above, we have made other non-material adjustments in the
financial statement disclosures to conform to the disclosures we will
file with our Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2004.

For convenience and ease of reference, we are filing our quarterly
report in its entirely with the applicable changes. PART IFINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following financial statements are filed with this report: Condensed Consolidated Balance Sheet as of March 31, 2004 (unaudited) and
December 31, 2003 (unaudited)Condensed Consolidated Statements of Operations for the three-month periods
ended March 31, 2004 (unaudited) and March 31, 2003 (unaudited) and cumulative
amounts since inception through March 31, 2004 (unaudited)Condensed Consolidated Statements of Cash Flows for the three-month periods
ended March 31, 2004 (unaudited) and March 31, 2003 (unaudited) and cumulative
amounts since inception through March 31, 2004 (unaudited)Notes to Unaudited Financial StatementsEXHIBIT 31EXHIBIT 32
  2




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MEDICAL DISCOVERIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY) 
 
 March 31, 2004
    
    December 31, 2003Current assetsCash
    
    $
    608,310
    
    
    $
    424,216Prepaid expenses
    
    
    
    
    
    
    11,331Current portion of deferred charges
    
    
    
    
    
    
    12,077Total current assets
    
    $
    608,310
    
    
    $
    447,624Current liabilitiesAccounts payable
    
    $
    2,200,019
    
    
    $
    2,066,727Accrued interest
    
    
    521,030
    
    
    
    524,294Current portion of notes payable
    
    
    664,217
    
    
    
    789,217Convertible notes payable
    
    
    448,202
    
    
    
    498,202Total current liabilities
    
    
    3,833,468
    
    
    
    3,878,440Stockholders deficitEscrow receivable
    
    
    
    
    
    
    (227,300
    )Additional
paid-in capital
    
    
    2,254,363
    
    
    
    579,363Common stock, no par value, authorized
100,000,000 shares; 88,657,885 and 76,456,095
shares issued and outstanding at March 31, 2004
and December 31, 2003
    
    
    12,988,627
    
    
    
    12,546,957Accumulated deficit prior to development stage
    
    
    (1,399,577
    )
    
    
    (1,399,577
    )Deficit accumulated during the development stage
    
    
    (17,068,571
    )
    
    
    (14,930,259
    )Total stockholders deficit
    
    
    (3,225,158
    )
    
    
    (3,430,816
    )Total
liabilities and stockholders deficit
    
    $
    608,310
    
    
    $
    447,624
 See notes to condensed consolidated financial statements 3




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MEDICAL DISCOVERIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY) 
 
 CumulativeAmountsFor the Three Months
    
    SinceEnded March 31,
    
    November 20,1991 (Date of2004
    
    2003
    
    Inception)Revenues
    
    $
    
    
    
    $
    
    
    
    $
    157,044Cost of goods sold
    
    
    
    
    
    
    
    
    
    
    14,564Gross profit
    
    
    
    
    
    
    
    
    
    
    142,480Research and development expenses
    
    
    38,643
    
    
    
    
    
    
    
    3,037,288Inventory writedown
    
    
    
    
    
    
    
    
    
    
    96,859Impairment loss
    
    
    
    
    
    
    
    
    
    
    9,709License
    
    
    
    
    
    
    
    
    
    
    1,001,500General and administrative expenses
    
    
    2,047,693
    
    
    
    147,201
    
    
    
    14,167,234Operating loss
    
    
    (2,086,336
    )
    
    
    (147,201
    )
    
    
    (18,170,110
    )Other income (expense)Interest income
    
    
    1,700
    
    
    
    
    
    
    
    25,106Other income
    
    
    
    
    
    
    
    
    
    
    880,484Interest expense
    
    
    (53,676
    )
    
    
    (58,033
    )
    
    
    (1,039,587
    )Forgiveness of debt
    
    
    
    
    
    
    
    
    
    
    1,235,536(51,976
    )
    
    
    (58,033
    )
    
    
    1,101,539Net loss
    
    $
    (2,138,312
    )
    
    $
    (205,234
    )
    
    $
    (17,068,571
    )Net basic
and diluted loss per share
    
    $
    (0.03
    )
    
    $
    (0.00

    )Weighted average shares outstanding
    
    
    84,830,304
    
    
    
    55,598,856
 See notes to condensed consolidated financial statements 4




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MEDICAL DISCOVERIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY) 
 
 CumulativeAmountsFor the Three Months
    
    SinceEnded March 31,
    
    November 20,1991 (Date of2004
    
    2003
    
    Inception)Cash flows from operating activitiesNet lossAdjustments to reconcile net loss to net
cash used by operating activities
    
    $
    (2,138,312
    )
    
    $
    (205,234
    )
    
    $
    (17,068,571
    )Common stock options issued for services
    
    
    
    
    
    
    
    
    
    
    3,136,253Common stock issued for services, expenses,
and litigation
    
    
    52,466
    
    
    
    
    
    
    
    4,253,682Stock compensation expense
    
    
    1,675,000
    
    
    
    
    
    
    
    1,675,000Reduction of escrow receivable from
research and development
    
    
    
    
    
    
    
    
    
    
    272,700Reduction of legal costs
    
    
    
    
    
    
    
    
    
    
    (130,000
    )Notes payable issued for litigation
    
    
    
    
    
    
    
    
    
    
    385,000Depreciation
    
    
    
    
    
    
    
    
    
    
    100,271Write-off of subscription receivables
    
    
    
    
    
    
    
    
    
    
    112,500Impairment loss on assets
    
    
    
    
    
    
    
    
    
    
    9,709Loss on disposal of equipment
    
    
    
    
    
    
    
    
    
    
    30,364Gain on debt restructuring
    
    
    
    
    
    
    
    
    
    
    (1,235,536
    )Write-off of receivables
    
    
    
    
    
    
    
    
    
    
    193,965Changes in assets and liabilitiesPrepaid expenses
    
    
    11,331
    
    
    
    (26,445
    )
    
    
    (1
    )Deferred charges
    
    
    12,077
    
    
    
    12,076
    
    
    
    1Accounts receivable
    
    
    
    
    
    
    
    
    
    
    (7,529
    )Inventory
    
    
    
    
    
    
    
    
    
    
    Other assets
    
    
    
    
    
    
    
    
    
    
    Accounts payable
    
    
    133,292
    
    
    
    64,634
    
    
    
    2,044,110Accrued expenses
    
    
    (3,264
    )
    
    
    42,082
    
    
    
    542,511Net cash used by operating activities
    
    
    (257,410
    )
    
    
    (112,887
    )
    
    
    (5,685,571
    )Cash flows from investing activitiesPurchase of equipment
    
    
    
    
    
    
    
    
    
    
    (132,184
    )Payments received on note receivable
    
    
    
    
    
    
    
    
    
    
    130,000Net cash used by investing activities
    
    
    
    
    
    
    
    
    
    
    (2,184
    )Cash flows from financing activitiesContributed equity
    
    
    
    
    
    
    
    
    
    
    131,374Issuance of common stock
    
    
    441,504
    
    
    
    
    
    
    
    4,586,163Payments on notes payable
    
    
    
    
    
    
    (25,000
    )
    
    
    (231,287
    )Proceeds from notes payable
    
    
    
    
    
    
    225,000
    
    
    
    1,336,613Payments on convertible notes payable
    
    
    
    
    
    
    
    
    
    
    (98,500
    )Proceeds from convertible notes payable
    
    
    
    
    
    
    
    
    
    
    571,702Net cash provided by financing activities
    
    
    441,504
    
    
    
    200,000
    
    
    
    6,296,065Net increase in cash
    
    
    184,094
    
    
    
    87,113
    
    
    
    608,310Cash, beginning of period
    
    
    424,216
    
    
    
    14,555
    
    
    
    Cash, end of period
    
    $
    608,310
    
    
    $
    101,668
    
    
    $
    608,310Supplemental disclosure of
non-cash activitiesRetirement
of notes payable of common stock
    
    
    $175,000
    
    
    
    
    
    
    
    
 See notes to condensed consolidated financial statements 5




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MEDICAL DISCOVERIES, INC. AND SUBSIDIARIES
(A Development Stage Company) 
 NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2004
 Note 1. Basis of Presentation. Unaudited Interim Financial Statements The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments and disclosures
necessary to a fair presentation of these financial statements have been
included. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Companys 2003 Annual
Report on Form 10-KSB for the year ended December 31, 2003, as filed with the
Securities and Exchange Commission. Certain reclassifications and other
corrections for rounding have been made in prior period financial statements to
conform to the current period presentation. The consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All significant inter-company transactions and balances have been
eliminated in consolidation. Stock Based Compensation
and Restatement The Company has two incentive stock option plans wherein 24,000,000 shares of
the Companys common stock can be issued. The Company granted 700,000 fully
vested stock options during the quarter ended March 31, 2004 to consultants with an exercise
price of $.05. These options were valued at $98,000 using the Black Scholes pricing model
 using the following weighted average assumptions: risk free interest
of 3.8%, expected dividend yield of 0%, volatility of 220% and an
expected life of 7 years. During the first quarter of 2004, the Company extended the expiration date of
options to purchase an aggregate amount of 18,403,000 shares of stock. As a result of
such extension, such options expire from between 2011 to 2013. Initially we reported that due to the change in expiration date, the
options would be subject to variable accounting treatment and would be revalued at the end of each quarter for the life of the option.
However, we have subsequently determined that the options are not
subject to variable accounting treatment, but instead to a one-time remeasurement of the options as if they were newly granted. The expense associated with the change in expiration date was $1,577,000. In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, which established financial accounting
and reporting standards for stock-based compensation. This standard defines a
fair value method of accounting for an employee stock option or similar equity
instrument. In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148, which revised certain
provisions of adopting a fair value method of accounting for stock options and
required certain additional disclosures regarding stock options. These
statements give entities the choice between adopting the fair value method or
continuing to use the intrinsic value method under Accounting Principles Board
(APB) Opinion No. 25 with footnote disclosures of the pro forma effects if the
fair value method had been adopted. The Corporation has opted for the latter
approach. The Company accounts for its stock options under Accounting Principles Board
(APB) Opinion No. 25 using the intrinsic value method. The Company has elected
not to adopt the provisions of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation (FAS 123). In accordance with
Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, pro-forma net income, stock-based
compensation expense, and earnings per share using the fair value method are
stated as follows: Three Months Ended March 31,2004
    
    2003Net loss
applicable to common stockholders, as reported
    
    $
    (2,138,312
    )
    
    $
    (205,234
    )Add: Stock-based
employee compensation expense included in reported net loss
    
    
    1,577,000
    
    
    
    Deduct:
Total stock based employee compensation expense
determined under fair value based method for all awards
    
    
    (1,916,768
    )
    
    
    (5,000
    )Pro forma
net loss applicable to common shareholders
    
    $
    (2,478,080
    )
    
    $
    (210,234
    )Basic and
diluted loss per share, as reported
    
    $
    (.03
    )
    
    $
    (.00
    )Basic and
diluted loss per share, pro forma
    
    $
    (.03
    )
    
    $
    (.00
    )
 6




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Assumptions used to calculate the income statement impact of stock options
granted as if the Company had adopted FAS 123 were as follows: 2004
    
    2003Expected
dividend yield
    
    
    
    
    
    
    Risk free
interest rate
    
    
    3.8
    %
    
    
    5.00
    %Expected volatility
    
    
    220
    %
    
    
    511
    %Expected life
    
    
    7 years
    
    
    
    10 yearsWeighted
average fair value per share
    
    $
    0.10
    
    
    $
    0.04
 Note 2. Going Concern Considerations. The Companys recurring losses from the Companys development-stage activities
in current and prior years raise substantial doubt about the Companys ability
to continue as a going concern. The financial statements do not include any
adjustments to reflect the possible effects on the recoverability and
classification of assets or amounts and classifications of liabilities that may
result from the possible inability of the Company to continue as a going
concern. The Company is attempting to raise additional capital to sustain
operations. However, there can be no assurance that these plans will be
successful. Note 3. Commitment Regarding Peregrine Stock. Peregrine Properties, LLC, a Utah limited liability company (Peregrine),
entered into an agreement to provide $500,000 to the Company to fund testing
and research steps necessary to continue development of MDI-P. The studies were
funded through an escrow agent. As of December 31, 2000, the Company had
deposited in escrow a single certificate for 5.5 million shares of common stock
for these purposes. Through December 31, 2003, Peregrine had funded $275,800
to the escrow, of which $272,700 had been disbursed and recorded as research
and development expense on the financial statements of the Company. The
remaining $227,300 to be expended under the agreement had been recorded on the
balance sheet in equity under the caption escrow receivable. On March 22, 2002, the
parties entered into an agreement the result of which was to partially close
the escrow agreement to the extent of Peregrines funding to date. On that
date, 3,143,800 shares were distributed to Peregrine and all research conducted
to date was disbursed to the Company. As of February 20, 2004, the Company
held Peregrine in breach with respect to its remaining funding obligation and
terminated the Peregrine research agreement. Company management and legal
counsel are in the process of releasing the remaining 2,356,200 shares from
escrow, which shares have been cancelled. The Company also wrote off the escrow receivable against common stock. Note 4. Issuance of Common
Stock. During the first quarter of
2005, the company issued 14,558,790 shares of restricted common stock, 1,311,650 of which were issued for services valued at $52,466, 2,209,540 of which were issued upon the conversion of $175,000 in debt, and 11,037,600 of which were issued for $441,504 in cash. 7




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The purpose of this section is to discuss and analyze our consolidated
financial condition, liquidity and capital resources, and results of
operations. This analysis should be read in conjunction with the financial
statements and notes thereto at pages 2 through 7 and Managements Discussion
and Analysis of Financial Condition and Results of Operations contained in our
Annual Report on Form 10-KSB for the year ended December 31, 2003 (the 2003
10-KSB). This section contains certain forward-looking statements that involve risks and
uncertainties, including statements regarding our plans, objectives, goals,
strategies and financial performance. Our actual results could differ
materially from the results anticipated in these forward-looking statements as
a result of factors set forth under Cautionary Statement for Forward-Looking
Information and Factors Affecting Future Results below and elsewhere in this
report. Overview  We are a development-stage bio-pharmaceutical company engaged in the research,
validation, development and ultimate commercialization of a patented
anti-infective technology. Our electrolyzed solution of free radicals
represents a novel approach to treating our initial target indication, HIV. We
plan in the near future to conclude our pre-clinical work and enter the clinic
in our initial target indication. If our HIV clinical trials are successful,
we plan to develop this therapy for additional target indications.Our product, called MDI-P, appears to have the ability to destroy certain
viruses, bacteria and fungi without any associated toxicity both in animals and
in cell-based assays. We are committed to the development of MDI-P as an
anti-infective therapeutic product for in-vitro and in-vivo applications. Our
highest priority is to develop and commercialize MDI-P as a pharmaceutical for
the treatment of HIV. We are in the process of completing pre-clinical
development and plan to file an Investigative New Drug application (IND) with
the Food and Drug Administration (FDA) for MDI-P as an HIV treatment. If the
FDA approves the IND, we will begin a Phase I clinical test at the Harvard
School of Medicine using a protocol designed by Dr. Bruce Dezube. We expect to
add additional indications for the use of MDI-P in the future as we complete
our pre-clinical development.To date, we have not generated significant revenues from operations or realized
a profit. Through March 31, 2004, we had incurred a cumulative net loss since
inception of $17,068,571. We are currently attempting to secure capital
commitments to finance the completion of our pre-clinical analysis, file our
IND for MDI-P as an HIV therapeutic, determine additional potential indications
for MDI-P, and to otherwise continue research and testing of our technologies
in order to secure required approvals to bring products to market. In that we
are a development stage company, we will increasingly require additional
funding to continue the development of our technology and to finance submittal
of our testing and trials to the appropriate regulatory agencies in order to
secure approvals for product development and sales. Recent Events Asthma Study Confirms Low Toxicity Profile and Efficacy of MDI-P.On April 22,
2004, MDI announced the receipt of its second in a series of pre-clinical
reports from Dr. Emil Chi, Chairman of the Department of Histopathology at the
University of Washington Medical School. This trial, one of several studies on
models of disease which mimic human disease, focused on MDI-P as a potential
therapeutic agent for the treatment of the symptoms of asthma. More than 28-million Americans suffer from asthma, a major medical problem
requiring medication to open blocked airways and relieve mucus build-up in both
acute and chronic asthma attacks. In the late 1990s, Dr. Chi developed a
now-standard mouse model to assess asthma therapeutic agents for efficacy and
toxicity. This model is believed to have at least an 80% predictive value of
results in humans. In the study, 36 female mice were examined in a chronic asthma model, using
various doses of MDI-P as a therapeutic agent as measured against saline
control. Samples of bronchial lavage lung fluid and tissue were taken from all
mice, with assays performed in airway mucus build-up and eosinophil
infiltration, a prime blood cell measure of asthmatic attacks. 8




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More than 70% of the MDI-P treated mice exhibited no increase in mucus
secretions, comparable with saline control animals, with a marked reduction in
eosinophil infiltration. Untreated asthmatic mice, in contrast, had more than a
nine-fold increase in mucus build-up as compared with saline controls. Further,
no toxicity was found in the MDI-P treated mice. To the best of our knowledge of other published studies in clearing mucus plugs
in the same mouse model, there is no product on the market or soon to be
released from pharmaceutical pipelines which accomplishes a similar clearing of
mucus plugs in the majority of treated chronic asthmatic mice. From this test,
we speculate that MDI-P may prove to be a very beneficial agent exhibiting
minimal toxicity for addressing asthma attacks. This study and the other pre-clinical studies of MDI-P are required for filing
our Investigational New Drug (IND) application later this year with the FDA for
our primary target use for MDI-P, which is treating humans with HIV. These
studies test MDI-P on animal models of diseases which mimic those of humans.
There is not an animal test relevant to HIV/AIDS in humans, so we are testing
MDI-P on other standard animal/mimicking human models, such as our
recently-reported sepsis results, in order to determine if there is any
potentially significant toxicity to humans related to usage of MDI-P. This
report, in addition to other preclinical reports and our CMC/CGMP data, will
allow us to file an IND with the FDA for our initial target indication, HIV,
and enter clinical trials sometime late in 2004 or early in 2005, continuing
the path to commercialization. We have filed a patent application covering the use of MDI-P to treat asthma. Additional Secured Debt Eliminated from Balance Sheet.As a result of a
negotiated transaction, in April 2004 we were able to eliminate approximately
$130,000 of secured debt from our balance sheet. The transaction converted a
secured promissory note in the original principal amount of $125,000, plus
accrued interest, to common stock. Results of Operations Revenues and Gross Profit.We did not book any revenue for the quarters ended
March 31, 2004 or March 31, 2003. As we continue to pursue pre-clinical and
clinical testing of MDI-P as a pharmaceutical for the treatment of HIV as well
as other pre-commercialization testing of our technologies, we do not
anticipate booking significant revenues in the near future. Operating Expenses and Operating Loss.We spent $38,643 on research and
development for the quarter ended March 31, 2004, on preclinical tests of
MDI-P. We did not have any research and development expenses for the same
period of 2003. Our general and administrative expenses were $2,047,693 during
the first quarter of 2004, as compared to $147,201 during the quarter ended
March 31, 2003. The large general and administrative expenses for the first
quarter of 2004 was due to a one-time non-cash charge of $1,577,000 as a result of
extending the expiration date of options outstanding. As a result of the
foregoing, we sustained an operating loss of $2,086,336 for the quarter ended
March 31, 2004, as compared with an operating loss of $147,201 for the same
period of 2003. Other Income/Expense and Net Loss.We booked $1,700 in interest income and
incurred interest expenses of $53,676 for the quarter ended March 31, 2004, as
compared with no interest income and $58,033 in interest expenses for the same
period of 2003. In sum, our net loss for the first quarter of 2004 was
$2,138,312 or a loss of $0.03 per fully diluted share. For the quarter ended
March 31, 2003, we incurred a net loss of $205,234, a loss of less than $0.01
per fully diluted share. Future Expectations.We expect to operate at a loss for several more years
while we continue to study, gain regulatory approval of and commercialize our
technologies. We will spend more in 2004 in research and development expenses
as we continue to implement our commercialization strategy. Similarly, we
expect our general and administrative expenses to increase in 2004 as we seek
patent protection relating to our pre-clinical progress on MDI-P. As a result,
we expect to sustain a greater net loss in 2004, than we have in recent years. Liquidity and Capital Resources As of March 31, 2004, we had $608,310 in cash and had a working capital deficit
of $3,225,158. Since our inception, we have financed our operations primarily
through private sales of equity and the issuance of convertible and
non-convertible notes. We will require 9




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significant additional funding to
continue to develop, research and seek
regulatory approval of our technologies. We do not currently generate any cash
from operations and have no credit facilities in place or available. Currently,
we are funding operations through issuances of private equity and short-term
loans from shareholders and others. We are seeking to raise substantial additional funds in private stock offerings
in order to meet our near-term and mid-term funding requirements. While we are
optimistic that we can raise such funds, we have not always been successful in
doing so in recent years. In addition, we currently do not have any shares
available to issue for these purposes and are seeking at our annual meeting of
shareholders scheduled for May 21, 2004, approval from our shareholders to
increase our authorized shares. Given that we are still in an early
development stage and do not have revenues from operations, raising equity
financing is difficult. In addition, any additional equity financing will have
a substantial dilutive effect to our current shareholders. Pursuant to our commercialization strategy, we estimate we will need to expend
an additional $500,000 in research and development to file an IND application
with the FDA for MDI-P as an HIV therapy. In addition, we estimate we will
need to expend an additional $300,000 to $475,000 in debt service and general
and administrative costs between now and when we hope to file the IND in Q4
2004 or Q1 2005. Given our current cash position, we are between $200,000 and
$375,000 short to advance our highest priority target, HIV, to the next
development milestone. Once our IND application is submitted, and assuming it is approved, we will
need additional capital to initiate Phase I clinical trials and progress
through FDA clinical testing toward the end of a drug that is approved for
marketing and sales. We estimate the cost to complete Phase I and Phase II
clinical trials to be several million dollars and the cost to complete Phase
III testing and obtain approval of an NDA to be in the tens of millions of
dollars. While our ability to obtain financing may improve in the event our IND
application is approved, we cannot give assurances that we will have the access
to the significant capital required to take a drug through regulatory approvals
and to market. We may seek a partner in the global pharmaceutical industry to
help us co-develop, license, or even purchase some or all of our technologies. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements as defined in Item 303(c) of
Regulation S-B. Cautionary Statement for Forward Looking Information Certain information set forth in this report contains forward-looking
statements within the meaning of federal securities laws. Forward looking
statements include statements concerning our plans, objectives, goals,
strategies, future events, future revenues or performance, capital
expenditures, and financing needs and other information that is not historical
information. When used in this report, the words estimates, expects,
anticipates, forecasts, plans, intends, believes and variations of
such words or similar expressions are intended to identify forward-looking
statements. Additional forward-looking statements may be made by us from time
to time. All such subsequent forward-looking statements, whether written or
oral and whether made by us or on our behalf, are also expressly qualified by
these cautionary statements. Our forward-looking statements are based upon our current expectations and
various assumptions. Our expectations, beliefs and projections are expressed in
good faith and are believed by us to have a reasonable basis, including without
limitation, our examination of historical operating trends, data contained in
our records and other data available from third parties, but there can be no
assurance that our expectations, beliefs and projections will result or be
achieved or accomplished. Our forward-looking statements apply only as of the
date made. We undertake no obligation to publicly update or revise
forward-looking statements which may be made to reflect events or circumstances
after the date made or to reflect the occurrence of unanticipated events. There are a number of risks and uncertainties that could cause actual results
to differ materially from those set forth in, contemplated by or underlying the
forward-looking statements contained in this report. Those risks and
uncertainties include, but are not limited to, our lack of significant
operating revenues and lack of profit to date, our need for substantial and
immediate additional capital, the fact that we may dilute existing shareholders
through additional stock issuances, the extensive governmental regulation to
which we are subject, the fact that our technologies remain unproven, the
intense competition we face from other companies and other products,
and our reliance upon potentially 10




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inadequate intellectual property. Those risks and
certain other uncertainties are discussed in more detail in the 2003 10-KSB.
There may also be other factors, including those discussed elsewhere in this
report, that may cause our actual results to differ from the forward-looking
statements. Any forward-looking statements made by us or on our behalf should
be considered in light of these factors. ITEM 3. CONTROLS AND PROCEDURES (a)     Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such term
is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act
of 1934, as amended (the Exchange Act), as of March 31, 2004. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were effective as of
March 31, 2004. (b)     There have been no significant changes (including corrective actions with
regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in paragraph (a) above. PART II
OTHER INFORMATION ITEM 2.  CHANGES IN
SECURITIES (c)     We sold the following unregistered securities during the
period covered by this report. None of the sales involved an
underwriter. We believe
 these sales were exempt from registration pursuant to Section 4(2) of the Securities
 Act of 1933 because the sales did not involve a public offering.   11,037,600 shares of restricted common stock at $0.04 per share. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K  (a)
    
    Exhibits. The following documents are furnished as exhibits to this Form 10-QSB. Exhibits
marked with an asterisk are filed herewith. The remainder of the exhibits
previously have been filed with the Commission and are incorporated herein by
reference. NUMBER
    
    EXHIBIT3.1
    
    Amended and Restated Articles of Incorporation of the Company (filed as
Exhibit 3.1 to the Companys Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1994, and incorporated herein by reference).3.2
    
    Amended Bylaws of the Company (filed as Exhibit 3.2 to the Companys
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994,
and incorporated herein by reference).10.1
    
    Employment Agreement dated as of May 15, 2002 between Medical
Discoveries, Inc. and Judy M. Robinett (filed as Exhibit 10.4 to the
Companys Quarterly Report on Form 10-QSB for the quarter ended June 30,
2002, and incorporated herein by reference).10.2
    
    2002 Stock Incentive Plan adopted by the Board of Directors as of July
11, 2002 (filed as Exhibit 10.5 to the Companys Quarterly Report on Form
10-QSB for the quarter ended June 30, 2002, and incorporated herein by
reference).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.*
 (b) Reports on Form 8-K. The Company filed Current Reports on Form 8-K on January 15, 2004, January 21,
2004 and March 18, 2004. 11




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SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized. MEDICAL DISCOVERIES, INC./S/ JUDY M. ROBINETTJudy M. RobinettPresident and Chief Executive Officer
 Date: November 15, 2004 12




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INDEX TO EXHIBITS NUMBER
    
    EXHIBIT3.1
    
    Amended and Restated Articles of Incorporation of the Company (filed as
Exhibit 3.1 to the Companys Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1994, and incorporated herein by reference).3.2
    
    Amended Bylaws of the Company (filed as Exhibit 3.2 to the Companys
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994,
and incorporated herein by reference).10.1
    
    Employment Agreement dated as of May 15, 2002 between Medical
Discoveries, Inc. and Judy M. Robinett (filed as Exhibit 10.4 to the
Companys Quarterly Report on Form 10-QSB for the quarter ended June 30,
2002, and incorporated herein by reference).10.2
    
    2002 Stock Incentive Plan adopted by the Board of Directors as of July
11, 2002 (filed as Exhibit 10.5 to the Companys Quarterly Report on Form
10-QSB for the quarter ended June 30, 2002, and incorporated herein by
reference).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. 13