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

                                FORM 10-QSB

(Mark One)

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

          For the quarterly period ended        Sept. 30, 1998
                                               --------------------

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

          For the transition period from _____________ to ______________

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

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

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


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


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

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

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

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


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


     State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 24,240,634
                                                             -----------
as of October 31, 1998
      ----------------

     Transitional Small Business Disclosure Format (check one)

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

ITEM 1.  FINANCIAL STATEMENTS

The following financial statements are filed with this report:

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

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

     Statements of Cash Flows for the Nine-Month Periods ended
     Sept. 30, 1998 (unaudited) and Sept. 30, 1997 (unaudited).

     Notes to Unaudited Financial Statements.
<PAGE>

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

                                       Sept. 30, 1998      December 31, 1997
                                       --------------     ------------------
CURRENT ASSETS
        Cash                             $ 151,858               $     765
        Accounts receivable                  3,761                  30,585
        Inventory                          134,500                       0
        Prepaid expenses                    15,089                  10,869
                                         ----------              ----------
          Total Current Assets             305,208                  42,219

PROPERTY AND EQUIPMENT
        Equipment                          105,248                  72,304
        Less: Accumulated depreciation     (34,492)                (23,507)
                                         ----------              ----------
          Net Property and Equipment        70,756                  48,797

OTHER ASSETS
        Deposits                               900                   3,160

Total Assets                             $ 376,864               $  94,176
                                         ==========              ==========
CURRENT LIABILITIES
     Accounts payable                   $1,302,858               $ 916,734
     Accrued interest                       32,072                  14,360
     Current maturities of:
        Notes payable                      106,000                 102,591
        Convertible notes payable          291,700                 291,700
                                         ----------              ----------
          Total Current Liabilities      1,732,630               1,325,385

STOCKHOLDERS' EQUITY
     Common Stock, no par value,
        authorized 100,000,000           7,138,997               6,507,317
        shares; 24,240,634 shares
        issued and outstanding at
        Sept. 30, 1998
     Retained deficit                   (8,382,263)             (7,626,026)
     Subscription receivables             (112,500)               (112,500)
                                        -----------             -----------
     Total Stockholders' Equity         (1,355,766)             (1,231,209)
                                        -----------             -----------

TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                 $  376,864              $   94,176
                                        ===========             ===========


<PAGE>


<TABLE>
<CAPTION>

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

                                                                                              Cumulative
                              For the three months             For the nine month           Amounts since
                                 ended Sept. 30,                  ended Sept. 30,             November 20,
                            ----------------------------    ----------------------------   1991 (date of
                                 1998              1997          1998              1997       inception)
                            ----------          --------    ----------        ----------     -----------

REVENUE
<S>                         <C>               <C>           <C>              <C>            <C>        
  Product sales             $   4,837         $       0     $  17,684        $        0     $    17,684
  Clinical fees                     0                 0             0                 0         108,200
  Interest                      1,357                 0         2,515                 0          23,406
                            ----------        ----------    ----------        ----------    ------------
    Total Revenue               6,194                 0        20,199                 0         149,290

COST OF GOODS SOLD              2,250                 0         7,250                 0           7,250
                            ----------        ----------    ----------        ----------    ------------
GROSS MARGIN                    3,944                 0        12,949                 0         142,040

EXPENSES
  License                           0                 0             0                 0       1,001,500
  Research and development    131,530            50,407       277,017            30,071       2,133,893
  General and administrative  243,679            79,577       452,711           298,298       5,042,168
                            ----------        ----------    ----------        ----------    ------------
     Total Expenses           375,209           129,984       729,728           328,369       8,177,561
                            ----------        ----------    ----------        ----------    ------------
NET LOSS FROM OPERATIONS     (371,265)         (129,984)     (716,779)         (328,369)     (8,035,521)

OTHER INCOME / (EXPENSE)     ( 13,237)          (10,775)      (39,459)          (42,005)        103,787
                            ----------        ----------    ----------        ----------    ------------

LOSS BEFORE INCOME TAXES     (384,502)         (140,759)     (756,238)         (370,374)     (7,931,734)
  AND EXTRAORDINARY ITEM

INCOME TAXES                        0                 0             0                 0               0
                            ----------        ----------    ----------        ----------    ------------
LOSS BEFORE EXTRAORDINARY    (384,502)         (140,759)     (756,235)         (370,374)     (7,931,734)
  ITEM

FORGIVENESS OF DEBT                 0                 0             0                 0       1,235,536
                            ----------        ----------    ----------        ----------    ------------
NET INCOME                  $(384,502)        $(140,759)    $(756,235)        $(370,374)    $(6,696,198)
                            ==========        ==========    ==========        ==========    ============

INCOME / (LOSS) PER SHARE
  Loss from continuing
  operations                 $   (0.02)     $    (0.01)      $  (0.03)       $    (0.01)     $   (0.44)
  Gain from debt
  forgiveness                     0.00            0.00           0.00              0.00           0.07
                            -----------      -----------    ------------      -----------    ------------
  Income / (loss) per
  share                     $    (0.02)      $   (0.01)    $    (0.03)        $   (0.01)     $   (0.37)
                            ===========     ============    ============      ===========     ===========

WEIGHTED AVERAGE NUMBER
  OF SHARES                  23,997,410      22,060,975      23,897,943        21,873,600      18,184,851
                            ===========     ============    ============      ===========     ===========
</TABLE>




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

                                                                 Cumulative
                                    For the nine months         amounts since
                                      ended June 30,            November 20,
                                   -------------------------    1991 (date of
                                       1998         1997         inception)
                                   -----------   -----------    -------------
OPERATING ACTIVITIES
  Net income (loss) for the
    period                         $ (756,237)   $ (266,067)    $ (6,982,686)
  Add non-cash items
    Common stock issued for
      services and license                  0       313,508        3,419,236
    Reduction of legal costs                0             0         (130,000)
    Depreciation                       10,985         9,311           35,951
    Loss on disposal of equipment           0             0           30,364
    Gain on debt restructuring              0      (673,486)      (1,235,536)
    Write-off receivables                   0             0          193,965
    Decrease (increase) in:
      Receivables                      26,825        31,566           19,296
      Inventory                      (134,500)            0         (134,500)
      Prepaid Expenses                 (4,220)       51,035          (15,089)
      Other assets                      2,260             0             (900)
    Increase (decrease) in:
      Accounts payable                386,124        52,227        1,146,949
      Accrued expenses                 17,712         9,678           53,553
                                    ----------   -----------    ------------
Net Cash from Operations             (222,172)     (472,228)      (3,599,397)

INVESTING ACTIVITIES
  Purchases of equipment              (32,944)      (19,611)        (128,911)
  Payments received on note
    receivable                              0             0           99,414
                                    ----------   -----------    ------------
Net Cash from Investing Activities    (32,944)      (19,611)         (29,497)

FINANCING ACTIVITIES
  Increase in notes payable                 0        12,545          101,000
  Payment of notes payable             (3,409)            0           (3,161)
  Increase in notes payable                 0             0          316,700
  Equity contributed                        0             0          131,374
  Proceeds from issuance of
     common stock                     631,680       485,000        3,234,839
                                    ----------   -----------    ------------
    Net Cash from Financing
      Activities                      635,089       497,545        3,780,752
                                    ----------   -----------    ------------
NET INCREASE / (DECREASE) IN CASH     151,094         5,706)         151,858

CASH, BEGINNING PERIOD                    764        37,833                0
                                    ----------   -----------    ------------
CASH ENDING PERIOD                  $ 151,858    $   43,539     $    151,858
                                    ==========   ===========    ============
<PAGE>
                          MEDICAL DISCOVERIES, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               Sept. 30, 1998

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


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


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


OPERATIONS AND LIQUIDITY.

MDI had booked  revenue of $17,684 for the period from  January 1, 1998 to Sept.
30, 1998 compared to no revenue for the same period in 1997. The revenue results
from  preliminary  market  preference  testing  of  Electrolyzed  Ionizer  Water
purification devices targeted at the home health care markets. The company spent
$277,017 in research and development  costs during the first nine months of 1998
compared  to $30,071 for the same period in last year.  The  increased  spending
reflects the final stage testing of the Company's novel drug "MDI-P" targeted at
the  HIV/AIDS  disease in  preparation  for filing an  Investigational  New Drug
Application ("IND") with the Food and Drug Administration ("FDA"). MDI increased
its General and Administrative  expense by 52 percent to $452,711 from $298,298.
This  increase is mainly a result of the launch of the MDI  HealthCare  Systems,
Inc. subsidiary. In addition to the start-up expenses, the company has purchased
inventory  valued at $130,000 and  production  equipment for $24,855 for the new
company.  The company is currently in negotiations  related to convertible notes
payables  totaling  $291,700 which mature at various dates from October 12, 1998
to February 12, 1998. MDI seeks to extend payment terms on these notes.  Funding
for on-going  operations and current maturities of notes payable is discussed in
the "Additional Funding is Required" section below.


TECHNOLOGY UPDATE

MDI continues validation testing of its novel drug "MDI-P" targeted at the
HIV/AIDS  disease.  In testing  during the last  quarter,  MDI-P was shown to be
capable of killing  HIV in cell  cultures  without  mortality  to the cells.  In
addition,  toxicity  studies  have been  initiated  and a final  report  will be
available by the second  quarter 1999. As a pre-cursor to an IND  application at
the FDA, MDI has also initiated  microbiology  studies.  These studies should be
completed by February 1999.  Before an IND can be  progressed,  the Company will
need to  complete  more  in-vitro  HIV  studies  and  chemical  characterization
studies.  The Company  anticipates  these studies will completed and that an IND
can be filed during the second  quarter of 1999. If the FDA accepts the IND, MDI
will be able to begin clinical trials in the third quarter of 1999.  Progress of
the Company's  plan for submission to the FDA of an IND  Application  depends on
the continued success of the toxicity, microbiology,  studies and the completion
of the  chemical  characterization  work  and  sufficient  funding  to  complete
testing.  See "Additional Funding Required" section below. While results to date
continue to show promise,  the Company can provide no assurance  the  technology
will eventually be proven.
<PAGE>


JOINT VENTURE ACTIVITIES

MDI  entered  into  a  Joint  Venture  Agreement  in  July  1998  with  Advanced
Bio-Technologies, Inc. ("ABT"). MDI and ABT formed a joint venture company named
Regenere,   Inc.  to  pursue   certain   targeted   markets  in  the  skin  care
cosmeceuticals area.

Regenere,  Inc., a subsidiary of Medical  Discoveries,  Inc. has retained Nevada
counsel to enforce its rights under the Joint  Venture  Agreement  with Advanced
BioTechnologies,  Inc. to account for proceeds  delivered to former officers and
directors and for a declaration from the courts to its rights in the matter.

Existing  management  of Regenere  Inc.  does not believe  that the lawsuit will
affect the Company's ability to achieve its Business Plan, and that this lawsuit
will not affect the ongoing  activities of Medical  Discoveries,  Inc., which is
not a party to the action.


NEW CONSUMER PRODUCTS SUBSIDIARY

MDI's new operating division,  MDI HealthCare Systems, has been established as a
separate corporation named MDI HealthCare Systems, Inc. ("MDI-HCS").  MDI-HCS is
a wholly owned  subsidiary  of MDI. The  establishment  of MDI-HCS as a separate
corporation allows MDI-HCS to develop a separate  corporate identity  consistent
with  the  needs of the  cosmeceuticals  health  care  industry  focused  on the
identification,  exploration,  validation,  development and commercialization of
innovative solutions for scar therapy,  wound healing, and skin care and repair.
This strategy is consistent  with the Company's  intention to utilize certain of
its proprietary technologies,  intellectual property and key personnel resources
to enter less restrictive  consumer markets which offer rapid revenue  producing
opportunities.  MDI-HCS  anticipates a first quarter 1999 product  launch of its
InvisiScar (tm),  Aqua-Cleanse (tm), and  Beautification  Face Mask (tm) product
lines.

Jack Kushner has joined MDI-HCS as Vice-President,  Research & Development.  Mr.
Kushner is  responsible  for the  development of a number of wound care products
and provides a new  dimension to the  Company's  consumer  products  subsidiary.
MDI-HCS is  negotiating  various  distribution  agreements for its products that
should be completed  during the fourth  quarter of 1998 and the first quarter of
1999. The Company is developing  production capacity and a distribution channel.
The success of MDI-HCS depends on the Company's  ability to properly finance the
product launch and the response of competitive products. See "Additional Funding
Required" section below.


PATENT ACTIVITY

The Company  has filed an  additional  patent  with the US Patent and  Trademark
Office on newly developed electrolysis technology that has been developed by the
Japan-based research and development team.


FUNDING

In September 1998, the Company raised $200,000 in exchange for 266,667 shares of
common stock at a price of $0.75 per share,  warrants to purchase 533,334 shares
<PAGE>

of stock at prices ranging from $0.75 to $1.50 per share, and certain  exclusive
limited  distribution  rights for the Company's own products as well as products
from MDI-HCS.  A private financial group consisting of USA-based medical doctors
representing a variety of specialties  provided the funding.  In connection with
this funding, MDI will receive additional investment consulting services from an
investment  banking  concern in exchange  for 80,000  warrants  to purchase  the
Company's common stock at $0.001 per share, and 333,333 warrants to purchase the
Company's common stock at prices ranging from $0.50 to $0.75 per share. The bulk
of this funding will be spent on validation  testing  required for submission to
the FDA of an IND application for MDI-P targeted  against the HIV/AIDS virus and
to meet the cash requirements of MDI-HCS.

MDI TRUST FUND NOTES.  The company has various notes totaling  $289,200 with due
dates  ranging  from  October  11,  1998  to  February  11,  1999due  to the MDI
Investment  Trust.  At the request of the  beneficiaries  of the Trust,  MDI has
arranged  for  extended  payment  terms of the notes to be paid  directly to the
beneficiaries  of the Trust.  MDI will need to raise an  additional  $289,200 to
repay the beneficiaries over the next three months.

ADDITIONAL  FUNDING  IS  REQUIRED.   Management  intends  to  raise  substantial
additional  funds in private stock offerings in the near future in order to meet
its near-term funding requirements.  In the future,  management  anticipates the
need to raise  substantial  additional  funds in public stock offerings as well.
The funds to be raised will be used in the following  areas: 1) submission of an
IND Application with the FDA for it novel  Anti-HIV/AIDS  drug, 2) the launch of
MDI-HCS,  3) payment  of the MDI Trust  Fund  obligations,  4)  commencement  of
payment of salaries to Company  personnel,  and 5) at such time as funds  become
available, the prior debts of the company.


<PAGE>
                             PART II
                         OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Regenere,  Inc., a subsidiary of Medical  Discoveries,  Inc. has commenced legal
action against Advanced Bio-Technologies,  Inc. its former Joint Venture partner
in order to enforce its rights under the Joint Venture  Agreement  with Advanced
Bio-Technologies,  Inc. to account for proceeds delivered to former officers and
directors  and for a  declaration  from the courts to its rights in the  matter.
Medical Discoveries, Inc, is not a party to the action.

The company anticipates no other litigation and no other litigation is pending.


ITEM 2.  CHANGES IN SECURITIES

     N/A


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     N/A


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

     N/A


ITEM 5.  OTHER INFORMATION

     N/A

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

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

     The following are exhibits to this Form 10-QSB.

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

27                 Financial Data Schedule.

     (b)  Reports on Form 8-K

          N/A
<PAGE>
SIGNATURES

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



                             MEDICAL DISCOVERIES, INC.



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