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 SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to __________
Commission file number 0-12627
MEDICAL DISCOVERIES, INC.
(Exact name of Small Business Issuer as specified in its charter)
Utah 87-0407858
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
738 Aspenwood Lane, Twin Falls, Idaho 83301
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(208) 736-1799
- --------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
1800 South West Temple, Suite 304, Salt Lake City, Utah 84115
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of December 31, 2000,
there were 32,075,421 shares of the issuer's Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following consolidated financial statements are filed with this report:
Consolidated Balance Sheet as of September 30, 2000 (unaudited) and
December 31, 1999 (unaudited)
Consolidated Statements of Operations for the three-month and
nine-month periods ended September 30, 2000 (unaudited) and September
30, 1999 (unaudited) and cumulative amounts since inception through
September 30, 2000 (unaudited)
Consolidated Statements of Cash Flows for the nine-month periods ended
September 30, 2000 (unaudited) and September 30, 1999 (unaudited) and
cumulative amounts since inception through September 30, 2000
(unaudited)
Notes to Unaudited Consolidated Financial Statements
2
MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
September 30, 2000 December 31, 1999
------------------ -----------------
CURRENT ASSETS
Cash $ 2,207 $ 10,152
Inventory 0 99,370
--------------- -------------
Total Current Assets 2,207 109,522
--------------- -------------
PROPERTY AND EQUIPMENT
Equipment 83,506 108,521
Less: Accumulated depreciation (77,563) (79,328)
--------------- -------------
Net Property and Equipment 5,943 29,193
--------------- -------------
OTHER ASSETS 0 900
--------------- -------------
Total Assets $ 8,150 $ 139,615
=============== =============
CURRENT LIABILITIES
Accounts payable $ 1,787,684 $ 1,780,811
Accrued interest 164,038 108,154
Current maturities of:
Notes payable 470,807 387,807
Convertible notes payable 200,983 200,983
--------------- -------------
Total Current Liabilities 2,623,512 2,477,755
--------------- -------------
STOCKHOLDERS' DEFICIT
Common Stock, no par value, authorized 100,000,000 shares;
26,656,959 shares issued and outstanding, respectively 9,913,837 9,913,837
Retained deficit (12,416,699) (12,139,477)
Subscription receivables (112,500) (112,500)
--------------- -------------
Total Stockholders' Deficit (2,615,362) (2,338,140)
--------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 8,150 $ 139,615
=============== =============
See notes to consolidated financial statements
3
MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS CUMULATIVE AMOUNTS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 SINCE 11/20/91
2000 1999 2000 1999 (DATE OF INCEPTION)
---------------------------- ---------------------------- -------------------
REVENUE
Revenue and fees $ 0 $ 0 $ 7,620 $ 0 $ 134,229
Interest 0 0 0 0 23,406
----------- ----------- ----------- ----------- -------------
Total Revenue 0 0 7,620 0 157,635
----------- ----------- ----------- ----------- -------------
COST OF GOODS SOLD 0 0 2,511 0 10,261
----------- ----------- ----------- ----------- -------------
GROSS MARGIN 0 0 5,109 0 147,374
----------- ----------- ----------- ----------- -------------
EXPENSES
License 0 0 0 0 1,001,500
Research and development 0 10,633 244 376,006 2,272,535
Inventory writedown 96,859 0 96,859 0 96,859
Impairment loss 9,709 0 9,709 0 9,709
General and administrative 27,188 63,490 119,635 246,281 7,980,221
----------- ----------- ----------- ----------- -------------
Total Expenses 133,756 74,123 226,447 622,287 11,360,824
----------- ----------- ----------- ----------- -------------
NET LOSS FROM OPERATIONS (133,756) (74,123) (221,338) (622,287) (11,213,450)
----------- ----------- ----------- ----------- -------------
OTHER INCOME / (EXPENSE) (25,987) (19,576) (55,884) (78,334) (250,712)
----------- ----------- ----------- ----------- -------------
LOSS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (159,743) (93,699) (277,222) (700,621) (11,464,162)
----------- ----------- ----------- ----------- -------------
INCOME TAXES 0 0 0 0 0
----------- ----------- ----------- ----------- -------------
LOSS BEFORE
EXTRAORDINARY ITEM ( 159,743) ( 93,699) (277,222) (700,621) (11,464,162)
----------- ----------- ----------- ----------- -------------
FORGIVENESS OF DEBT 0 0 0 0 1,235,536
----------- ----------- ----------- ----------- -------------
NET LOSS $ (159,743) $ (93,699) $ (277,222) $ (700,621) $(10,228,626)
=========== =========== ========== =========== =============
INCOME / (LOSS) PER SHARE
Loss from continuing
operations $ (0.01) $ (0.00) $ (0.01) $ (0.03) $ (0.57)
Gain from debt forgiveness 0.00 0.00 0.00 0.00 0.06
-------- -------- -------- -------- --------
Income / (loss) per share $ (0.01) $ (0.00) $ (0.01) $ (0.03) $ (0.51)
======== ======== ======== ======== ========
WEIGHTED AVERAGE
NUMBER OF SHARES 26,656,959 26,602,539 26,656,959 26,493,405 20,071,906
See notes to consolidated financial statements
4
MEDICAL DISCOVERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 & SEPTEMBER 30, 1999 &
CUMULATIVE AMOUNTS
(UNAUDITED)
FOR THE NINE MONTHS CUMULATIVE AMOUNTS
ENDED SEPTEMBER 30 SINCE 11/20/91
2000 1999 (DATE OF INCEPTION)
---------------------------- -------------------
OPERATING ACTIVITIES
Net income (loss) for the period $ (277,222) $ (700,621) $(11,017,122)
Add non-cash items
Common stock options issued for services 0 0 2,556,890
Common stock issued for services and license 0 54,000 3,559,986
Reduction of legal costs 0 0 (130,000)
Depreciation 13,541 9,816 94,328
Loss on disposal of equipment 0 0 30,364
Gain on debt restructuring 0 0 (1,235,536)
Write-off receivables 0 0 193,965
Inventory writedown 96,859 0 96,859
Impairment loss 9,709 0 9,709
Decrease (increase) in:
Receivables 0 (2) (7,529)
Inventory 2,511 (1,201) ( 96,859)
Prepaid Expenses 0 10,973 0
Other assets 900 509 0
Increase (decrease) in:
Accounts payable 6,873 410,050 1,631,775
Accrued expenses 55,884 16,978 185,519
------------ ------------ -------------
Net Cash from Operations (90,945) (199,498) (4,127,651)
------------- ------------ -------------
INVESTING ACTIVITIES
Purchases of equipment 0 0 (132,184)
Payments received on note receivable 0 0 130,000
------------ ------------ --------------
Net Cash from Investing Activities 0 0 (2,184)
------------ ------------ --------------
FINANCING ACTIVITIES
Increase in notes payable 83,000 162,701 616,613
Payment of notes payable 0 (50,000) (188,004)
Increase in notes payable 0 0 316,700
Equity contributed 0 0 131,374
Proceeds from issuance of common stock 0 2,000 3,255,359
------------ ------------ --------------
Net Cash from Financing Activities 83,000 114,701 4,132,042
------------ ----------- --------------
NET INCREASE / (DECREASE) IN CASH ( 7,945) (84,797) 2,207
CASH, BEGINNING PERIOD 10,152 84,847 0
------------ ------------ --------------------
CASH, ENDING PERIOD $ 2,207 $ 50 $ 2,207
============ ============== ================
See notes to consolidated financial statements
5
MEDICAL DISCOVERIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS.
The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments and disclosures
necessary to a fair presentation of these financial statements have been
included. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's 1999 Annual
Report on Form 10-KSB for the year ended December 31, 1999, 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 subsidiary. All significant inter-company transactions and
balances have been eliminated in consolidation.
NOTE 2. INVENTORIES.
The Company has maintained inventory during the period 1998 through September
30, 2000. There were no significant sales of the product during the year and no
anticipated future sales. Company management determined the inventory was no
longer salable as of September 30, 2000. Accordingly, the remaining inventory
was charged to expense. The charge of $96,859 is included in the statement of
operations under the caption of inventory writedown.
NOTE 3. ASSET IMPAIRMENT.
At September 30, 2000 the Company evaluated whether an impairment of the asset
used to manufacture the inventory existed due to the discontinuance of the sale
and production of that type of inventory. The evaluation determined that an
impairment does exist with respect to the equipment. The recognition of this
impairment was in accordance with the provisions of SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of, and
resulted in assets being written down to their estimated discounted cash flow.
The non-cash impairment loss was $9,709.
NOTE 4. 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 5. CONTINGENCIES REGARDING HARVEST JV AGREEMENT.
As of June 28, 2000, the Company, an outside investment group (Harvest Group,
L.L.C ("Harvest")), and Hydromedics, Inc. ("Hydromedics"), a corporation formed
by Harvest and two other investors, entered into a so-called JV Agreement (the
"JV Agreement"). The JV Agreement contemplated that the Company would (1) assign
to Hydromedics its rights to certain skin care products, (2) issue 13,000,000
shares to Harvest, and (3) seek to appoint two Harvest representatives to the
Company's board of directors. In return, Hydromedics would (1) issue 2,000,000
of its shares to the Company, (2) assume certain obligations of the Company
associated with the skin care products to be transferred, and (3) market the
skin care products. As for Harvest's obligations, the JV Agreement contemplated
that Harvest would (1) assign to the Company 20,000,000 of its previously-owned
Hydromedics shares and (2) make available to the Company a $150,000 line of
credit. Finally, the JV Agreement contemplated certain post-closing obligations
including (1) Harvest making an
6
additional investment in Hydromedics in exchange for 30,000,000 shares of
Hydromedics stock, (2) Harvest assigning 20,000,000 of such shares to the
Company, and (3) the Company issuing an additional 12,000,000 shares of its
stock to Harvest. In total, the transactions contemplated by the JV Agreement
would result in the Company owning approximately 40% of Hydromedics and Harvest
owning 25,000,000 new shares of the Company's stock (which, if issued, would
equal approximately 44% of the Company's total outstanding stock).
The JV Agreement provided that the transactions contemplated above were to have
closed on June 28, 2000. However, no closing occurred on June 28, 2000 or since
and the Company has taken the position that the transactions contemplated by the
JV Agreement have not been consummated. Harvest and Hydromedics recently and for
the first time attempted to tender partial performance under the JV Agreement.
The Company rejected that tender and has taken the position that the JV
Agreement is no longer enforceable by any of the parties because no party timely
or completely tendered performance.
On December 26, 2000, Harvest demanded arbitration of the dispute pursuant to
terms of the JV Agreement. In its arbitration demand, Harvest is seeking
specific performance of the JV Agreement or damages in excess of $1 million. The
Company has retained legal counsel and is seeking advice concerning how to
respond. If a court or arbitrator were to force the Company and the other
parties to specifically perform the transactions contemplated by the JV
Agreement, the Company's shareholders could suffer significant dilution because
the value of the consideration the Company will receive under the JV Agreement
could be substantially less than the current market value of the stock to be
issued to Harvest. In addition, specific performance could result in significant
changes to the Company's financial statements, especially if the JV Agreement
were deemed to have been consummated during a period already reported. The
financial statements do not include any adjustments or reserves to reflect the
possible effects of such a result.
NOTE 6. COMMITMENT REGARDING PEREGRINE STOCK.
Peregrine Properties, LLC, a Utah limited liability company ("Peregrine"), has
agreed to provide $500,000 to the Company to fund testing and research steps
necessary to continue development of MDI-P. Under terms of an agreement with
Peregrine, MDI will issue 5.5 million shares of the Company's common stock to
Peregrine upon completion of the studies. The studies will be funded through an
escrow agent. During the interim period since September 30, 2000, the Company
deposited in escrow a single certificate for 5.5 million shares for these
purposes and Peregrine has so far deposited $120,000. The escrow agent has
periodically made disbursements of cash to those conducting the research and
Peregrine will make additional disbursements on its $500,000 commitment as
necessary. Upon completion of the studies, the escrow agent will disburse the
5.5 million shares to Peregrine and will disburse the research results to the
Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The purpose of this section is to discuss and analyze the Company's consolidated
financial condition, liquidity and capital resources and results of operations.
This analysis should be read in conjunction with Management's Discussion and
Analysis or Plan of Operation contained in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999 (the "1999 10-KSB").
OVERVIEW
Medical Discoveries, Inc. (the "Company" or "MDI") is a development stage
bio-pharmaceutical research company engaged in the research, development and
validation of a new class of drugs, based upon the Company's patented and
proprietary electrolysis technologies. The Company is developing active
anti-viral, anti-bacterial and anti-fungal agents for a variety of applications.
The Company has developed a product, MDI-P, which, based on preliminary
laboratory studies, appears to have the ability to destroy certain viruses
(including the HIV virus), bacteria, pathogenic fungi, parasites, and other
infectious agents. The Company believes MDI-P may possibly be used as a
sterilizing agent for medical and dental instruments. MDI-P may also potentially
be used to remove or inactivate infectious agents in human and animal
blood-derived products such as plasma and gamma globulin. The Company has
obtained patents on MDI-P, the equipment that manufactures it, and the process
by which it is manufactured.
7
Additional research, development and regulatory review must occur before the
Company can accurately assess the commercial value of or realize any value from
MDI-P or the Company's other products. Earlier this year the Company exhausted
its liquid assets available for research and operating expenses. Since that
time, the Company has taken a number of steps to attempt to turn around the
business. One of those steps was to appoint a new Chief Executive Officer.
Ms. Judy Robinett assumed the position of Chief Executive Officer of the Company
in early November, 2000. Since 1994, Ms. Robinett has owned and operated an
international consulting company focused on strategic planning, finance,
marketing and distribution for entrepreneurs and established companies. Her
prior employment positions included Vice President for Quality Improvement at
the Magic Valley Regional Medical Clinic in Twin Falls, Idaho, as well as
Division Manager, Quality Programs, for Universal Foods in Idaho. Prior to that,
Ms. Robinett was Group Manager, Employee Relations at EG&G's Nuclear Training
Facility in Idaho, and a Planner for the State Of Idaho. Ms. Robinett holds an
M.S. in Labor Economics and a B.S. from Utah State University.
The Company has also recently obtained new funding for additional research.
Peregrine Properties, LLC, a Utah limited liability company ("Peregrine"), has
agreed to provide $500,000 to the Company to fund critical testing and research
steps necessary to continue development of MDI-P. Under terms of the agreement,
MDI will continue to study the toxicology and chemistry of the drug and conduct
laboratory and clinical studies of the drug's efficacy. The research activities
will be directed by Dr. William J. Novick, the Company's Vice President and
Chief Technical Officer. The studies will be funded through an escrow agent.
Upon completion of the studies, the escrow agent will disburse 5.5 million
shares of the Company's common stock to Peregrine and will disburse the research
results to the Company. In addition, in consideration of the Peregrine funds,
the Company has agreed to nominate and seek the election of a Peregrine
representative to the Company's Board of Directors.
Finally, the Company is actively seeking additional funding for immediate
operating needs, continued research and development, and long-term capital
requirements. See "Liquidity and Capital Resources" below.
RESULTS OF OPERATIONS
For the nine-month period from January 1, 2000 to September 30, 2000, MDI booked
$7,620 revenue from isolated sales of the Company's skin care products to
Hydromedics, Inc. All of that revenue was earned in the second quarter pursuant
to an Exclusive Sales Agency Agreement between the Company and Hydromedics,
Inc., dated December 14, 1999. Those sales are not of the Company's core
products and the Company does not anticipate significant future revenue from
such sales. The Company did not earn any revenues in the third quarter of this
year. By comparison, the Company did not earn any revenues during the first
three quarters of 1999.
MDI spent $244 in research and development costs during the first nine months of
2000 compared to $376,006 for the same period last year. The absence of research
and development work during the first nine months of 2000 is a result of the
unavailability of funds to conduct research. MDI reduced its General and
Administrative expense to $119,635 during the first nine months of 2000 from
$246,281 for the same period last year. Funds to support operations during the
period came primarily from loans from Harvest Group, L.L.C.
The Company maintained an inventory of certain skin care products during the
period 1998 through September 30, 2000. However, there were no significant sales
of the products during the year and no anticipated future sales. Therefore, the
Company determined the remaining $96,859 of inventory was no longer salable as
of September 30, 2000 and charged it to expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company will require significant additional funding to continue to develop,
research and seek regulatory approval of its products. In addition, the Company
cannot survive, even in the near term, without immediate additional funding for
operations. The Company does not currently generate any cash from operations and
has no credit facilities in place or available. Currently, the Company is
funding operations through short-term loans from shareholders and others.
Management is seeking to raise substantial additional funds in private stock
offerings in order to meet its near-term and long-term funding requirements.
While management is optimistic that it can raise such funds, the Company has not
always
8
been successful in doing so in recent years. Given that the Company is still in
an early development stage and does not have revenues from operations, raising
equity financing is difficult. In addition, any additional equity financing will
have a substantial dilutive effect to the Company's current shareholders.
JOINT VENTURE AGREEMENT
As the Company has previously reported, as of June 28, 2000, the Company, an
outside investment group (Harvest Group, L.L.C. ("Harvest")), and Hydromedics,
Inc. ("Hydromedics"), a corporation formed by Harvest and two other investors,
entered into a so-called JV Agreement (the "JV Agreement"). The JV Agreement
contemplated that the Company would (1) assign to Hydromedics its rights to
certain skin care products, (2) issue 13,000,000 shares to Harvest, and (3) seek
to appoint two Harvest representatives to the Company's board of directors. In
return, Hydromedics would (1) issue 2,000,000 of its shares to the Company, (2)
assume certain obligations of the Company associated with the skin care products
to be transferred, and (3) market the skin care products. As for Harvest's
obligations, the JV Agreement contemplated that Harvest would (1) assign to the
Company 20,000,000 of its previously-owned Hydromedics shares and (2) make
available to the Company a $150,000 line of credit. Finally, the JV Agreement
contemplated certain post-closing obligations including (1) Harvest making an
additional investment in Hydromedics in exchange for 30,000,000 shares of
Hydromedics stock, (2) Harvest assigning 20,000,000 of such shares to the
Company, and (3) the Company issuing an additional 12,000,000 shares of its
stock to Harvest. In total, the transactions contemplated by the JV Agreement
would result in the Company owning approximately 40% of Hydromedics and Harvest
owning 25,000,000 new shares of the Company's stock (which, if issued, would
equal approximately 44% of the Company's total outstanding stock).
The JV Agreement provided that the transactions contemplated above were to have
closed on June 28, 2000. However, no closing occurred on June 28, 2000 or since
and the Company has taken the position that the transactions contemplated by the
JV Agreement have not been consummated. Harvest and Hydromedics recently and for
the first time attempted to tender partial performance under the JV Agreement.
The Company rejected that tender and has taken the position that the JV
Agreement is no longer enforceable by any of the parties because, among other
reasons, no party timely or completely tendered performance.
On December 26, 2000, Harvest demanded arbitration of the dispute pursuant to
terms of the JV Agreement. In its arbitration demand, Harvest is seeking either
specific performance of the JV Agreement or damages in excess of $1 million. The
Company has retained legal counsel and is seeking advice concerning how to
respond. If a court or arbitrator were to force the Company and the other
parties to specifically perform the transactions contemplated by the JV
Agreement, the Company's shareholders could suffer significant dilution because
the value of the consideration the Company will receive under the JV Agreement
could be substantially less than the current market value of the stock to be
issued to Harvest.
CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION
Certain information set forth in this report contains "forward-looking
statements" within the meaning of federal securities laws. Forward looking
statements include statements concerning plans, objectives, goals, strategies,
future events, future revenues or performance, capital expenditures, and
financing needs of the Company and other information that is not historical
information. When used in this report, the words "estimates," " expects,"
"anticipates," "forecasts," "plans," "intends," "believes" and variations of
such words or similar expressions are intended to identify forward-looking
statements. Additional forward-looking statements may be made by the Company
from time to time. All such subsequent forward-looking statements, whether
written or oral and whether made by or on behalf of the Company, are also
expressly qualified by these cautionary statements.
The Company's forward-looking statements are based upon the Company's current
expectations and various assumptions. The Company's expectations, beliefs and
projections are expressed in good faith and are believed by the Company to have
a reasonable basis, including without limitation, management's examination of
historical operating trends, data contained in the Company's records and other
data available from third parties, but there can be no assurance that
management's expectations, beliefs and projections will result or be achieved or
accomplished. The Company's forward-looking statements apply only as of the date
made. The Company undertakes no obligation to publicly update or revise
forward-looking statements which may be made to reflect events or circumstances
after the date made or to reflect the occurrence of unanticipated events.
9
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. These risks and
uncertainties include, but are not limited to, the ultimate effectiveness of the
Company's products, the regulatory environment, the technical and engineering
risks associated with new product development, the availability of funding, the
cooperation of the Company's creditors, the ability of the Company to attract
and retain competent personnel, market acceptance of the Company's products, the
presence of competitors, and competing technologies. Some of these risks and
certain other uncertainties are discussed in more detail in the 1999 10-KSB.
There may also be other factors, including those discussed elsewhere in this
report, that may cause the Company's actual results to differ from the
forward-looking statements. Any forward-looking statements made by or on behalf
of the Company should be considered in light of these factors.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 26, 2000, Harvest Group, L.L.C. filed a demand for arbitration with
the American Arbitration Association in Salt Lake City, Utah, alleging that the
Company breached the JV Agreement discussed in Part I above under the heading
"Joint Venture Agreement." Harvest is seeking either specific performance or
damages in excess of $1 million. The Company has retained legal counsel and is
seeking advice concerning how to respond. No further proceedings have occurred
in the matter since the demand was filed.
ITEM 5. OTHER INFORMATION
RESIGNATION OF CFO. Scott Wood, the Company's former Chief Financial Officer,
resigned effective June 30, 2000. Mr. Wood was erroneously listed as a
representative of the Company on the Company's November 14, 2000 12b-25 filing
requesting an extension of the filing date for the Company's 10-QSB for the
quarter ended September 30, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report.
10.1 JV Agreement dated as of June 28, 2000, among Medical Discoveries,
Inc., Harvest Group, L.L.C., and Hydromedics, Inc. (f/k/a Advanced
Sales Company, Inc.)
27 Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter for which this report is
filed. However, subsequent to such quarter, the Company filed 8-Ks (and an
amendment) on December 15, 2000, December 21, 2000 and January 4, 2001 (as
amended) concerning changes in the Company's accountant.
10
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 Robinett
------------------------------------------
Judy Robinett
Chief Executive Officer
Date: January 18, 2001
11
INDEX TO EXHIBITS
Exhibits
10.1 JV Agreement dated as of June 28, 2000, among Medical
Discoveries, Inc., Harvest Group, L.L.C., and Hydromedics,
Inc. (f/k/a Advanced Sales Company, Inc.)
27 Financial Data Schedule
12