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 MARCH 31, 2005
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _________________ to _________________
Commission file number 333-62216_
HEALTH DISCOVERY CORPORATION
(Exact name of small business issuer as specified in its charter)
TEXAS 74-3002154
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1116 S. OLD TEMPLE ROAD LORENA, TEXAS 76655
(Address of principal executive offices)
(512) 583-4500
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since the 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. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 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: 98,268,381 shares of common stock, no
par value, were issued and outstanding as of May 13, 2005.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I Financial Information
Item 1. Financial Statements Page
Balance Sheet 1
Statements of Operations 2
Statements of Cash Flows 3
Notes to Financial 4
Statements
Item 2. Management's Discussion and Analysis or Plan of Operation 6
Item 3. Controls and Procedures 8
Part II Other Information 9
Item 1. Legal Proceedings 9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 9
Item 6. Exhibits and Reports in Form 8-K 11
Signatures 13
Certifications 14
HEALTH DISCOVERY CORPORATION
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 2005
Assets
------
Current Assets
Cash $ 1,130,812
Employee Advances 3,500
Prepaid Expenses 2,706
--------------
Total Current Assets 1,137,018
--------------
Equipment, Less Accumulated Depreciation of $2,678 11,294
Other Assets
Patents, Less Accumulated Amortization of $199,440 3,310,560
--------------
Total Assets $ 4,458,872
==============
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Accounts Payable - Trade $ 124,924
Accrued Liabilities 334,922
Current Portion of Long-Term Debt 634,910
--------------
Total Current Liabilities 1,094,756
--------------
Convertible Notes Payable 1,127,818
Long-Term Debt, Less Current Portion 173,657
--------------
Total Liabilities 2,396,231
--------------
Commitments and Contingencies
Stockholders' Equity
Common Stock, No Par Value, 200,000,000 Shares Authorized
Issued and Outstanding 97,346,529 Shares 6,271,877
Paid for but not Issued 250,000 Shares 32,250
Deficit Accumulated During Development Stage (4,241,486)
--------------
Total Stockholders' Equity 2,062,641
--------------
Total Liabilities and Stockholders' Equity $ 4,458,872
==============
1
HEALTH DISCOVERY CORPORATION
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
AND THE PERIOD FROM APRIL 6, 2001 (DATE OF INCEPTION) TO MARCH 31, 2005
Three Months Three Months April 6, 2001
Ended Ended (Inception) to
March 31, March 31, March 31,
2005 2004 2005
---- ---- ----
Revenues
Capital Gain (Loss) on Sale of Assets $ - $ - $ (20)
Dividend Income - - 64
Miscellaneous Income 405
--------------- --------------- ---------------
- -
Total Revenues 449
--------------- --------------- ---------------
- -
Expenses
Administrative Fees 950 - 58,559
Amortization 56,819 9 199,440
License Fees 30 30 242,527
Outside Services - - 80,841
Professional and Consulting Fees 448,042 35,662 1,920,474
Compensation 199,543 177,536 1,088,770
Other General and Administrative Expenses 222,536 56,055 651,324
--------------- --------------- ---------------
Total Expenses 927,920 269,292 4,241,935
--------------- --------------- ---------------
Net Loss $ (927,920) $ (269,292) $ (4,241,486)
=============== =============== ===============
Average Outstanding Shares 85,237,154 66,576,128 37,434,125
Loss Per Share $ (.01) $ (.01) $ (.11)
2
HEALTH DISCOVERY CORPORATION
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
AND THE PERIOD FROM APRIL 6, 2001 (DATE OF INCEPTION) TO MARCH 31, 2005
Three Months Three Months From Inception
Ended Ended (April 6, 2001)
March 31, March 31, to March 31,
2005 2004 2005
---- ---- ----
Cash Flows From Operating Activities
Net Loss $ (927,920) $ (269,292) $ (4,241,486)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Noncash Compensation - - 117,000
Administrative Expenses Settled by Common Stock - - 50,719
Services Exchanged for Common Stock 75,000 - 743,546
Depreciation and Amortization 57,778 9 202,118
Increase in Employee Advances (3,500) - (3,500)
Increase in Prepaid Expenses (2,706) - (2,706)
Decrease (Increase) in Accounts Payable - Trade (109,761) 25,068 124,924
Increase in Accrued Liabilities 24,049 27,968 161,857
------------------ ------------------ ------------------
Net Cash Used by Operating Activities (887,060) (216,247) (2,847,528)
------------------ ------------------ ------------------
Cash Flows From Investing Activities
Purchase of Equipment (5,882) - (13,972)
Amounts Paid to Acquire Patents (3,223) - (170,262)
------------------ ------------------ ------------------
Net Cash Used by Investing Activities (9,105) - (184,234)
------------------ ------------------ ------------------
Cash Flows From Financing Activities
Repayments of Notes Payable (62,500) (62,500) (539,092)
Proceeds from Sales of Common Stock, Net 1,926,000 287,600 4,701,666
------------------ ------------------ ------------------
Net Cash Provided by Financing Activities 1,863,500 225,100 4,162,574
------------------ ------------------ ------------------
Net Increase in Cash 967,335 8,853 1,130,812
Cash, at Beginning of Period 163,477 76,589 -
------------------ ------------------ ------------------
Cash, at End of Period $ 1,130,812 $ 85,442 $ 1,130,812
================== ================== ==================
Non-Cash Investing and Financing Transactions:
Patents Purchased Using Debt $ - $ - $ 2,475,477
Stock Issued for Professional and Consulting Services $ 75,000 $ - $ 743,546
Stock Issued for Administration Expenses $ - $ - $ 50,719
Stock Issued for Patents $ - $ - $ 864,261
Non-cash Compensation Warrants $ - $ - $ 117,000
Non-cash Stock Issuance Costs $ 127,076 $ - $ 173,065
3
HEALTH DISCOVERY CORPORATION
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
Health Discovery Corporation (formerly known as Direct Wireless Communications,
Inc.) (the "Company") has been in the development stage since the date of
incorporation on April 6, 2001. The Company was primarily engaged in the
activity of developing technology for a wireless telephone system until 2003,
when it decided to abandon its efforts in the telecommunications industry and
acquired new technologies in the biotechnology industry. The accounting
principles followed by the Company and the methods of applying these principles
conform with accounting principles generally accepted in the United States of
America (GAAP). In preparing financial statements in conformity with GAAP,
management is required to make estimates and assumptions that affect the
reported amounts in the financial statements. Actual results could differ
significantly from those estimates.
The interim financial statements included in this report are unaudited but
reflect all adjustments which, in the opinion of management, are necessary for a
fair presentation of the financial position and results of operations for the
interim periods presented. All such adjustments are of a normal recurring
nature. The results of operations for the period ended March 31, 2005 are not
necessarily indicative of the results of a full year's operations. For further
information, refer to the financial statements and footnotes included in the
Company's annual report on Form 10-KSB for the year ended December 31, 2004.
NOTE B - NET LOSS PER SHARE
Net loss per common share are based on the weighted average number of common
shares outstanding during the period. The effects of potential common shares
outstanding during the period would be included in diluted earnings (loss) per
share; however, the effects of potential shares would be antidilutive during all
periods presented.
NOTE C - PATENTS
The Company has acquired a group of patents related to biotechnology and certain
machine learning tools used for diagnostic and drug discovery. Additionally,
legal costs associated with patent acquisitions and the application process are
also capitalized as a part of patents. The Company has recorded $3,310,560 in
patents and patent related costs, net of accumulated amortization, at March 31,
2005.
Amortization charged to operations for the three months ended March 31, 2005 and
2004 and from the period from April 6, 2001 (date of inception) to March 31,
2005, was $56,819, $9 and $199,440, respectively. The weighted
average amortization period for patents is 15 years. Estimated amortization
expense for the next five years is $228,500 per year.
4
NOTE D - ACQUISITIONS
On May 9, 2005 the company acquired, or contractually agreed to acquire, the
remaining interest in the SVM portfolio of patents from a group of unrelated
third parties. The cost of the remaining interest consisted of a cash payment of
$267,634 the issuance of promissory notes totaling $51,547 and convertible notes
totaling $82,865, and the issuance of 379,624 shares of the Company's common
stock. The convertible notes were converted by the holders immediately upon
issuance in exchange for 487,441 shares of our common stock.
NOTE E - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE
Notes payable consist of the following:
Note payable to the individuals, bearing interest at 6% payable in quarterly
installments of $62,500 with a final payment due on October 1, 2005 $ 125,000
Notes payable to individuals, with imputed interest computed at 3.16 % with 683,567
-------
installments due every fourth month with a final payment due
February 28, 2006
808,567
Less current maturities (634,910)
-------
$ 173,657
=========
Convertible notes in an aggregate amount of $1,127,818 mature on July 28, 2009,
and may be converted at the election of the noteholders until that time into
shares of the Company's Common Stock at $.17 per share. In addition, the
noteholders are further limited to not sell more than 10% of such holder's
shares in any calendar quarter after the minimum holding period has expired. The
convertible notes bear interest at a rate of 3.16%.
On May 12, 2005 a convertible note holder elected to convert their debt to
shares of the Company's stock. The conversion will reduce the debt by $326,751
in exchange for 1,922,064 shares of common stock.
NOTE F - STOCKHOLDERS' EQUITY
During the first quarter of 2005, the Company continued its Round 2 sales of
restricted stock shares to qualified investors through a private placement
offering. The price of the restricted stock was $.16 per share. In addition,
each purchaser of stock shares was granted a warrant to acquire an equal number
of restricted common shares at a fixed price of $0.24 per share until December
2008. No portion of the proceeds were assigned to the value of the warrants
because the exercise price of the warrant exceeded the market value of the
underlying common stock on the date of purchase. As of March 31, 2005, a total
of 13,018,750 restricted common shares were sold to qualified individual
investors for $1,798,924, net of issuance costs of $284,076. The issuance cost
consisted of $157,000 in cash, 806,250 warrants, each entitling the holder to
buy one share of the Company's common stock for $0.24 valued at $120,958 and
17,480 of Company shares valued at $6,118
5
which was paid or accrued to consultants for assistance in selling the Company's
common stock As of March 31, 2005, 250,000 common shares and related warrants
had not been issued to the purchasers and are recorded as common shares
purchased and not issued on the Company's balance sheet.
SHARES ISSUED IN EXCHANGE FOR SERVICES
During 2005, the Company issued 375,940 common stock shares to consultants for
services. The shares were granted at the fair market value of the services
provided. Total consultant expense of $75,000 was recorded for the issuance. In
addition, under a consulting agreement, the Company was obligated to issue an
additional $60,000 of shares (amounting to 261,030 shares) to consultants at
March 31, 2005. The expense is accrued for at March 31, 2005 in accrued expenses
on the Company's balance sheet and a corresponding charge to consultant expense
in the statement of operations.
As noted above the Company has issued or committed to issue shares of the
Company's common stock and warrants to purchase the Company's common stock to
certain consultants in exchange for their assistance in selling Company shares.
The value of Company stock was derived based on a contractual arrangement based
on a percentage of the funds raised to be settled with the issuance of the
Company's shares at $.35 per share. The values of the Warrants were calculated
using the Black-Scholes option-pricing model.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
CASH REQUIREMENTS
As of May 9, 2005, the Company had approximately $485,000 in cash. On May 9,
2005, the Company acquired, or contractually agreed to acquire, the remaining 7%
of the SVM Patent Portfolio for an aggregate cash payment of approximately
$268,000, the issuance of promissory notes totaling $51,547 and convertible
notes totaling $82,865, and the issuance of 379,624 shares of the Company's
common stock. The convertible notes were converted by the holders immediately
upon issuance in exchange for 487,441 shares of our common stock. In addition, a
third holder of previously issued convertible notes exercised his conversion
rights, resulting in 1,922,064 shares being issued as a result of the conversion
of the $326,751 debt at $0.17 per share. Recurring monthly operating expenses
for the remainder of 2005, including salaries, are expected to be approximately
$127,000. A significant portion of our cash will be used to satisfy the
Company's outstanding debt obligations related to the acquisition of the Fractal
and SVM assets. The final two payments of $62,500 on the note resulting from the
acquisition of the assets of Fractal Genomics Corporation are due in July 2005
and October 2005. Scheduled payments of $259,000 (including interest) on notes
resulting from the acquisition of the SVM Portfolio will be due on August 31,
2005, January 31, 2005, and April 30, 2006. In addition, the Company estimates
that marketing and conference expenses of approximately $30,000 will be incurred
in May and June of 2005.
We have not realized any earned income since inception. However, we have entered
into agreements with MD Anderson Cancer Center, Stanford University Medical
Center and The University of Miami to perform analyses of clinical data using
our computational technologies, which we expect will earn income after the
identification, patent protecting and licensing of newly discovered biomarkers.
We have secured both joint ownership rights and/or first options for worldwide
exclusive rights to our discoveries in these contracts. After the close of the
second quarter of 2004, we acquired the rights to a portfolio of patents that
had initially been issued to Dr. Barnhill, our Chief Executive Officer, and to
several members of our Scientific Advisory Board. Those patents, together with
pending applications included in the portfolio, relate primarily to Support
Vector Machines (SVM's), which have applications in a wide variety of
disciplines in which it is necessary to analyze complex data sets. We expect to
be able to generate a stream of income by licensing the use of Support Vector
6
Machines covered by the patents. We have been able to fund our operations though
a private offering of our common stock under rules providing exemptions for such
offerings and will continue to do so.
During the remainder of 2005, we plan to focus on one or more of the following
initiatives. Management's time and fiscal resources will be allocated among the
projects based on management's judgment as to when discoveries in these areas
can be achieved and the possibility of securing revenue from those discoveries.
Management cannot guarantee that any discovery will result from any of the
following projects or that the company could obtain revenue from any such
discovery. Further, new initiatives may arise that management believes would be
more beneficial to the company. Initially, the five initiatives are:
CIRCULATING TUMOR CELL ANALYSIS - The company is attempting to use SVMs to
analyze digitized images of blood cells to identify circulating tumor cells. The
company believes this project can be completed with current salaried personnel
and equipment. We expect no significant additional costs to be incurred on this
project during 2005.
PROSTATE CANCER DIAGNOSTICS - The company has identified biomarkers that have
the potential to be useful in the diagnosis of prostate cancer with a much
higher degree of accuracy than existing tests, including the PSA test. In
addition, these biomarkers appear to allow us to differentiate high grade
prostate cancer from the less serious low grade prostate cancer. This project is
in the final validation phase. We plan to spend approximately $50,000 to
complete this final validation, which we expect to complete by the third quarter
of 2005.
BPH DRUG TARGET - While performing our analysis of prostate cancer specimens to
discover a new biomarker for diagnosing prostate cancer, we discovered a number
of genes that appear to be over expressed in patients with Benign Prostatic
Hyperplasia (BPH). Upon validation of this discovery, we plan to license the
discovery to a pharmaceutical company. This set of biomarkers could be used as a
drug target by the pharmaceutical company to develop a new drug to treat BPH.
All research and development related to this project will be done in conjunction
with the prostate cancer diagnostic project. No additional expenses are
expected.
BREAST CANCER (LYMPHANGIOGENESIS) - In March 2004 we entered into an agreement
with Stanford University to use our FGM computational techniques to identify new
patterns of biomarkers in lymphatic insufficiency and its response to
therapeutic lymphangiogenesis. This project will be completed with in-house,
salaried personnel. We expect no significant additional costs to be incurred
before completion of this project.
DIFFERENTIAL DIAGNOSIS FOR LEUKEMIA - The company will be validating our
discovery of a set of leukemia genes that have been shown to separate ALL-T-cell
leukemia from ALL-B-cell leukemia with 100% accuracy. We expect to incur
approximately $50,000 in costs to complete this validation.
ADDITIONAL FUNDING REQUIREMENT
We believe we have sufficient cash to continue operations through August, 2005
based on our current cash flows. Therefore, our continued operations will depend
on the production of revenue and/or the receipt of additional funding.
We have not realized any earned income since inception. While we have entered
into agreements to perform analyses of clinical data using our computational
technologies, we will earn income from those efforts only after the
identification, patenting, and licensing of new biomarkers.
Based on the current resources available to us, we will need additional equity
or debt financing or we will need to generate revenues through licensing our
products or providing services to others or entering into strategic
7
alliances to be able to sustain our operations until we can achieve
profitability, if ever. These matters raise substantial doubt about our ability
to continue as a going concern.
OUR CORPORATE STRATEGY
Our goal is to develop a product line of newly discovered biomarkers and
pathways, which will include human genes and genetic variations, as well as
gene, protein, and metabolite expression differences. In drug discovery,
biomarkers can help elicit disease targets and pathways and validate mechanisms
of drug action. They may also be pharmacodynamic indicators of drug activity,
response and toxicity for use in clinical development.
We intend to provide pharmaceutical and diagnostic companies with all aspects of
"first phase" diagnostic and drug discovery from expert assessment of the
clinical dilemma through proper selection and procurement of high quality
specimens. We will then apply our proprietary analytical evaluation methods and
state-of-the-art computational analysis to produce relevant and accurate
clinical data, producing accurate biomarker and pathway discoveries, resulting
in patent protection of our biomarker discoveries for future development.
"First Phase Biomarker Discovery" is based on the belief that in order to
discover the most clinically relevant biomarkers, the computational component
must begin at the inception of the clinical dilemma to be solved. This pathway
includes several critical levels of decision-making - all of which are part of
our business strategy.
The goal of Health Discovery Corporation is to produce more relevant and
predictable biomarkers for drug discovery so that new and better medicines and
diagnostic markers can be developed for patients worldwide.
With the completion of the acquisition of the SVM portfolio of patents the
company now will begin to license the use of this technology .
The Company does not anticipate purchase or sale of plant or significant
equipment. The Company also does not anticipate significant changes in the
number of employees.
We do not have any off-balance sheet arrangements.
FORWARD-LOOKING STATEMENT
This Report contains statements which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These statements appear in a number of
places in this Report and include all statements regarding the intent, belief or
current expectations of the Company, its directors or its officers with respect
to, among other things: (i) the Company's financing plans; (ii) trends affecting
the Company's financial condition or results of operations; (iii) the Company's
growth strategy and operating strategy; and (iv) the declaration and payment of
dividends. Investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors discussed herein and
those factors discussed in detail in the Company's other filings with the
Securities and Exchange Commission.
ITEM 3. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report (the "Evaluation Date"), we
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and President and our
Chief Administrative Officer, of the effectiveness of the design and operation
of our
8
disclosure controls and procedures pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934, as amended. Based upon this evaluation, our Chief
Executive Officer and our Chief Administrative Officer concluded that, as of the
Evaluation Date, our disclosure controls and procedures were effective under
Rule 13a-15.
Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that the Company's disclosure controls
and procedures will detect or uncover every situation involving the failure of
persons within the company to disclose material information otherwise required
to be set forth in the company's periodic reports.
The Company's management is also responsible for establishing and maintaining
adequate internal control over financial reporting to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. The Company previously had been notified by it's
outside independent auditing firm of material weaknesses in its internal
controls over financial reporting. During 2005, the Company made corrective
actions in its internal controls over financial reporting and management
believes that the controls are currently effective.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
After several rulings at the District Court, on August 25, 2004 the
Court of Appeals for the Tenth District of the State of Texas granted our appeal
and entered an order, remanding the case to the original trial judge with
instructions to issue a temporary injunction to preserve the status quo. The
injunction will remain until a judgment in the case becomes final or the court
otherwise instructs. The injunction requires the remaining defendants, their
agents, employees, affiliates, any person or entity they control, and any person
acting in concert with them to (i) stop and refrain from selling or otherwise
disposing of any share of our common stock; and (ii) deposit into the registry
of the District Court all shares of our common stock they now own or hold. Costs
of the appeal were assessed against the Respondents. The defendants have
asserted several counter claims against the company
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
From November 2004 through March 2005, the Company offered for sale restricted
stock shares to qualified investors through a private placement offering. The
price of the restricted stock was $.16 per share. In addition, each purchaser of
stock shares was granted a warrant to acquire an equal number of restricted
common shares at a fixed price of $0.24 per share until December 2008. No
portion of the proceeds were assigned to the value of the warrants because the
exercise price of the warrant exceeded the market value of the underlying common
stock on the date of purchase. As of December 31, 2004, a total of 5,434,375
restricted common shares were sold to qualified individual investors for
$695,761, net of issuance costs of $173,739. The issuance cost consisted of
$128,950 in cash, 218,746 warrants, each entitling the holder to buy one share
of the Company's common stock for $0.24 valued at $32,812 and 34,277 of Company
shares valued at $11,977 which was paid or accrued to consultants for assistance
in selling the Company's common stock As of December 31, 2004, the common shares
and related warrants had not been issued to the purchasers and are recorded as
common shares purchased and not issued on the Company's balance sheet.
Subsequent to December 31, 2004, the Company sold an additional 13,175,000
shares of restricted common shares for $.16 or $1,989,350, net of issuance costs
of $284,486. The issuance cost consisted of $158,000 in
9
cash, 806,246 warrants, each entitling the holder to buy one of the Company's
common stock for $0.24 valued at $120,937 and 15,855 of Company shares valued at
$5,549 which was paid or accrued to consultants for assistance in selling the
Company's common stock. In addition, each purchaser of common shares was granted
a warrant to acquire an equal number of restricted common shares at a fixed
price of $0.24 per share until December 31, 2008. No portion of the proceeds
were assigned to the value of the warrants because the exercise price of the
warrant exceeded the market value of the underlying common stock on the date of
purchase.
Under the private placement, the Company agreed to use its best efforts to file
a registration statement to register the shares of common stock and the shares
underlying the warrants issued and sold to the investors by May 9, 2005, and to
use its best efforts to cause the registration statement to be declared
effective within 120 days of May 9, 2005. On May 9, 2005, the Company filed a
preliminary registration statement with the Securities and Exchange Commission.
10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A EXHIBITS
(A) EXHIBITS. The following exhibits are attached hereto or incorporated by
reference herein (numbered to correspond to Item 601(a) of Regulation S-B, as
promulgated by the Securities and Exchange Commission):
3.1 Articles of Incorporation. Registrant incorporates by reference
Exhibit 3.1 to Registration Statement on Form SB-2, File No.
333-62216, filed June 4, 2001.
3.1(a) Articles of Amendment to Articles of Incorporation Registrant
incorporates by reference Exhibit 2.2 to Form 10-QSB, File No.
333-62216, filed November 14, 2001.
3.1(b) Articles of Amendment to Articles of Incorporation changing
Registrant name from Direct Wireless Communications, Inc., to
Health Discovery Corporation. Registrant incorporates by
reference Exhibit 3.1 (b) to Form 10-KSB File No. 333-62216 filed
March 3, 2004.
3.2 By-Laws. Registrant incorporates by reference Exhibit 3.2 to
Registration Statement on Form SB-2, File No. 333-62216, filed
June 4, 2001.
4.1 Copy of Specimen Certificate for shares of common stock.
Registrant incorporates by reference Exhibit 4.1 to Registration
Statement on Form SB-2, File No. 333-62216, filed June 4, 2001.
4.1(b) Copy of Specimen Certificate for shares of common stock.
Registrant incorporates by reference Exhibit 4.1 (b) to Form
10-KSB File No. 333-62216 filed March 30, 2004.
4.2 Excerpt from By-Laws. Registrant incorporates by reference
Exhibit 4.2 to Registration Statement on Form SB-2, File No.
333-62216, filed June 4, 2001.
4.2(A) Corrected Article 3.02 of By-Laws. Registrant incorporates by
reference Exhibit 4.2(A) to Amendment No. 2 to Registration
Statement on Form SB-2, File No. 333-62216, filed August 15,
2001.
4.3(a)* Non Qualified stock option agreements dated October 30, 2003
between registrant and David Cooper. Registrant incorporates by
reference Exhibit 4.3(a) to Form 10-KSB, File No. 333-62216,
filed March 30, 2004.
10.1 Asset purchase agreement between registrant dated September 15,
2003 and Barnhill Group LLC. Registrant incorporates by reference
Exhibit 10.2 to Form 10-KSB, File No. 333-62216, filed March 30,
2004.
10.2 Asset purchase agreement between registrant dated December 30,
2003 and Fractal Genomics LLC. Registrant incorporates by
reference Exhibit 10.3 to Form 10-KSB, File No. 333-62216, filed
March 30, 2004.
10.3* Employment Agreement with Stephen Barnhill. Registrant
incorporates by reference Exhibit 10.3 to Form 10-KSB, File No.
333-62216, filed April 19, 2005.
10.4* Employment Agreement with David Cooper. Registrant incorporates
by reference Exhibit 10.4 to Form 10-KSB, File No. 333-62216,
filed April 19, 2005.
10.5 Form of Asset Purchase agreement between the registrant and the
sellers of the SVM Portfolio and related assets. Registrant
incorporates by reference Exhibit 10.5 to Form 10-KSB, File No.
333-62216, filed March 30, 2004.
11
10.6 Form of Securities Purchase Agreement. Registrant incorporates by
reference Exhibit 10.6 to Form 10-KSB, File No. 333-62216, filed
April 19, 2005.
10.7 Form of Warrant. Registrant incorporates by reference Exhibit
10.7 to Form 10-KSB, File No. 333-62216, filed April 19, 2005.
10.8 Form of Securities Purchase Agreement. Registrant incorporates by
reference Exhibit 10.8 to Form 10-KSB, File No. 333-62216, filed
April 19, 2005.
10.9 Form of Warrant. Registrant incorporates by reference Exhibit
10.9 to Form 10-KSB, File No. 333-62216, filed April 19, 2005.
16 Letter by Darilek & Butler, CPA, regarding change in certifying
accountant. Registrant incorporates by reference Exhibit 16 to
Form 10-KSB, File No. 333-62216, filed April 19, 2005.
16.1 Letter by Clyde Bailey, P.C., regarding change in certifying
accountant. Registrant incorporates by reference Exhibit 16.1 to
Form 10-KSB, File No. 333-62216, filed April 19, 2005.
23 Consent of Clyde Bailey, Certified Public Accountant. Registrant
incorporates by reference Exhibit 23 to Form 10-KSB, File No.
333-62216, filed April 19, 2005.
31 Rule 13a-14(a)/15(d)-14(a) Certifications of Chief Executive
Officer.
31.1 Rule 13a-14(a)/15(d)-14(a) Certifications of Chief Financial
Officer.
32 Section 1350 Certification of Chief Executive Officer.
32.1 Section 1350 Certification of Chief Financial Officer.
* The indicated exhibit is a compensatory plan required to be filed as an
exhibit to this Form 10-KSB
(B) REPORTS ON FORM 8-K.
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SIGNATURES
In accordance with the requirement of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Health Discovery Corporation
Registrant
Date: May 16, 2005 /s/ Stephen D. Barnhill M.D.
----------------------------------------
Printed Name: Stephen D. Barnhill M.D.
Title: Chief Executive Officer
Date: May 16, 2005 /s/ Robert S. Braswell IV
----------------------------------------
Printed Name: Robert S. Braswell IV
Title: Chief Financial Officer /
Secretary
13