x
|
Quarterly
report under Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For
the quarterly period ended September 30,
2008
|
o
|
Transition
report under Section 13 or 15(d) of the Exchange Act
|
For
the transaction period from _____________ to
_____________
|
Commission
file number 333-62216
|
HEALTH DISCOVERY
CORPORATION
(Exact
name of small business issuer as specified in its
charter)
|
Georgia
|
74-3002154
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
2
East Bryan Street, Suite #601
Savannah, Georgia
31401
(Address
of principal executive offices)
|
912-443-1987
(Issuer's
telephone number, including area code)
|
(Former
name, former address and former fiscal year,
if
changed since the last report)
|
Large
Accelerated Filer o
|
Non-Accelerated
Filer o
|
|
Accelerated
Filer o
|
Smaller
Reporting Company x
|
PART I -- FINANCIAL INFORMATION |
1
|
Item 1. Financial Statements |
1
|
Balance Sheet |
1
|
Statements of Operations |
2
|
Statements of Cash Flows |
3
|
Notes to Financial Statements |
4
|
Item
2. Management’s Discussion and
Analysis of
Financial Condition and
Results of
Operations
|
10
|
Item 4T. Controls and Procedures. |
15
|
PART II -- OTHER INFORMATION |
16
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
16
|
Item 5. Other Information |
16
|
Item 6. Exhibits. |
17
|
SIGNATURES |
18
|
Assets
|
||||||||
September
30,
|
December
31,
|
|||||||
2008
(unaudited)
|
2007
|
|||||||
Current
Assets
|
||||||||
Cash
|
$ | 570,161 | 1,648,439 | |||||
Accounts
Receivable
|
112,500 | 112,500 | ||||||
Prepaid
Expenses and Other Assets
|
42,007 | 33,829 | ||||||
Total
Current Assets
|
724,668 | 1,794,768 | ||||||
Equipment,
Less Accumulated Depreciation of $24,307 and $22,402
|
16,528 | 7,596 | ||||||
Other
Assets
|
||||||||
Accounts
Receivable – Long Term
|
- | 112,500 | ||||||
Patents,
Less Accumulated Amortization of $1,096,227 and $942,974
|
2,845,781 | 3,042,820 | ||||||
Total
Assets
|
$ | 3,586,977 | 4,957,684 | |||||
Liabilities and Stockholders’
Equity
|
||||||||
Current
Liabilities
|
||||||||
Accounts
Payable – Trade
|
$ | 174,973 | 61,173 | |||||
Accrued
Liabilities
|
213,171 | 239,589 | ||||||
Deferred
Revenue
|
62,708 | 62,708 | ||||||
Total
Current Liabilities
|
450,852 | 363,470 | ||||||
Deferred
Revenue – Long Term
|
406,684 | 453,715 | ||||||
Total
Liabilities
|
857,536 | 817,185 | ||||||
Commitments
|
||||||||
Stockholders’
Equity
|
||||||||
Series
A Preferred Stock, Convertible, Stated Value of $0.08 per
Share,
|
||||||||
7,437,184 Shares
Authorized, Issued and Outstanding
|
594,975 | 594,975 | ||||||
Common
Stock, No Par Value, 300,000,000 Shares Authorized
|
||||||||
169,522,590 Shares Issued
and Outstanding
|
15,654,941 | 15,390,609 | ||||||
Accumulated
Deficit
|
(13,520,475 | ) | (11,845,085 | ) | ||||
Total
Stockholders’ Equity
|
2,729,441 | 4,140,499 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 3,586,977 | 4,957,684 |
Three
Months
|
Three
Months
|
Nine
Months
|
Nine
Months
|
|||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
September
30,
|
September
30,
|
September
30,
|
September
30,
|
|||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues:
|
||||||||||||||||
Licensing
|
$ | 18,700 | $ | 17,343 | $ | 50,054 | $ | 39,010 | ||||||||
Cost
of Revenues:
|
||||||||||||||||
Internal
Development
|
600 | 7,500 | 7,200 | 18,900 | ||||||||||||
Gross
Profit
|
18,100 | 9,843 | 42,854 | 20,110 | ||||||||||||
Operating
Expenses:
|
||||||||||||||||
Amortization
|
65,680 | 65,680 | 197,040 | 197,040 | ||||||||||||
Professional
and Consulting Fees
|
261,826 | 304,352 | 586,825 | 796,661 | ||||||||||||
Compensation
|
208,710 | 218,396 | 602,550 | 540,106 | ||||||||||||
Other
General and Administrative Expenses
|
104,490 | 128,729 | 367,077 | 362,464 | ||||||||||||
Total
Operating Expenses
|
640,706 | 717,157 | 1,753,492 | 1,896,271 | ||||||||||||
Loss
From Operations
|
(622,606 | ) | (707,314 | ) | (1,710,638 | ) | (1,876,161 | ) | ||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest
Income
|
6,459 | 4,926 | 35,983 | 14,902 | ||||||||||||
Litigation
Settlement
|
- | (42,000 | ) | - | (42,000 | ) | ||||||||||
Gains
on Restructuring of Accounts Payable
|
- | - | - | 44,594 | ||||||||||||
Interest
Expense
|
(253 | ) | (81,395 | ) | (735 | ) | (285,509 | ) | ||||||||
Total
Other Income (Expense)
|
6,206 | (118,469 | ) | 35,248 | (268,013 | ) | ||||||||||
Net
Loss
|
$ | (616,400 | ) | $ | (825,783 | ) | $ | (1,675,390 | ) | $ | (2,144,174 | ) | ||||
Weighted
Average Outstanding Shares
|
169,136,052 | 129,865,585 | 169,058,744 | 121,832,264 | ||||||||||||
Loss
Per Share
|
$ | (.00 | ) | $ | (.01 | ) | $ | (.01 | ) | $ | (.02 | ) |
Nine
Months
|
Nine
Months
|
|||||||
Ended
|
Ended
|
|||||||
Cash
Flows From Operating Activities
|
September 30, 2008
|
September 30, 2007
|
||||||
Net
Loss
|
$ | (1,675,390 | ) | $ | (2,144,174 | ) | ||
Adjustments
to Reconcile Net Loss to Net Cash
|
||||||||
Used
by Operating Activities:
|
||||||||
Stock
Issued in Settlement of Litigation
|
- | 32,000 | ||||||
Stock-based
Compensation
|
75,515 | 158,187 | ||||||
Services
Exchanged for Warrants
|
188,817 | 226,669 | ||||||
Issuance
of Warrants
|
- | 33,756 | ||||||
Accretion
of Debt Discount
|
- | 192,361 | ||||||
Gains
on Restructuring of Accounts Payable
|
- | (44,594 | ) | |||||
Depreciation
and Amortization
|
200,827 | 203,556 | ||||||
Refund
of Deposit
|
- | 25,759 | ||||||
Decrease
in Interest Receivable
|
1,106 | - | ||||||
Decrease
(Increase) in Accounts Receivable
|
112,500 | (280,000 | ) | |||||
(Decrease)
Increase in Deferred Revenue
|
(47,031 | ) | 430,989 | |||||
Increase
in Prepaid Expenses and Other Assets
|
(9,284 | ) | (8,198 | ) | ||||
Decrease
in Accounts Payable – Trade
|
(26,418 | ) | (34,538 | ) | ||||
Increase
in Accrued Liabilities
|
113,800 | 185,518 | ||||||
Net
Cash Used by Operating Activities
|
(1,065,558 | ) | (1,022,709 | ) | ||||
Cash
Flows From Investing Activities:
|
||||||||
Purchase
of Equipment
|
(12,720 | ) | (998 | ) | ||||
Investment
in Joint Venture
|
- | (5,000 | ) | |||||
Net
Cash Used by Investing Activities
|
(12,720 | ) | (5,998 | ) | ||||
Cash
Flows From Financing Activities:
|
||||||||
Proceeds
from Sales of Common Stock, Net of Fees
|
- | 2,436,540 | ||||||
Net
Cash Provided by Financing Activities
|
- | 2,436,540 | ||||||
Net
(Decrease) Increase in Cash
|
(1,078,278 | ) | 1,407,833 | |||||
Cash,
at Beginning of Period
|
1,648,439 | 674,366 | ||||||
Cash,
at End of Period
|
$ | 570,161 | $ | 2,082,199 | ||||
Stock-Based
Investing and Financing Transactions:
Common
Stock, Series A Preferred Stock and Warrants
Issued
in Settlement of Promissory Note
|
- | 1,893,774 | ||||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
Paid for Interest
|
$ | 735 | $ | 3,167 |
Option
Shares
|
Weighted
Average
Exercise Price
|
|||||||
Outstanding,
January 1, 2007
|
3,500,000 | $ | 0.11 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Outstanding,
December 31, 2007
|
3,500,000 | $ | 0.11 | |||||
Granted
|
7,250,000 | $ | 0.08 | |||||
Exercised
|
- | - | ||||||
Forfeited
|
(1,500,000 | ) | $ | ( 0.11 | ) | |||
Outstanding,
September 30, 2008
|
9,250,000 | $ | 0.09 |
Nine
Months Ended
|
Twelve
Months Ended
|
|||||||
September
30
|
December
31
|
|||||||
Number
of warrants issued
|
2008
|
2007
|
||||||
Outstanding
beginning of period
|
159,099,644 | 68,796,250 | ||||||
Issued
|
1,500,000 | 122,773,394 | ||||||
Exercised
|
- | (100,000 | ) | |||||
Expired
or forfeited
|
(3,050,000 | ) | (32,370,000 | ) | ||||
Outstanding
end of the period
|
157,549,644 | 159,099,644 |
Exercise Prices
|
Number
Outstanding
|
Weighted-
Average
Remaining
Contractual
Life (years)
|
Number
Exercisable
|
Weighted
Average
Remaining
Contractual
Life
(years)
of
Exercisable
Warrants
|
|||||
$0.01
|
200,000
|
0.3
|
200,000
|
0.3
|
|||||
$0.08
|
2,050,000
|
5.1
|
841,667
|
2.0
|
|||||
$0.10
|
1,425,750
|
0.5
|
1,425,750
|
0.5
|
|||||
$0.11
|
1,500,000
|
0.9
|
1,500,000
|
0.9
|
|||||
$0.12
|
150,000
|
0.3
|
150,000
|
0.3
|
|||||
$0.13
|
5,000,000
|
1.5
|
5,000,000
|
1.5
|
|||||
$0.14
|
52,138,822
|
1.9
|
52,138,822
|
1.9
|
|||||
$0.15
|
1,000,000
|
0.3
|
1,000,000
|
0.3
|
|||||
$0.16
|
10,000,000
|
1.0
|
10,000,000
|
1.0
|
|||||
$0.19
|
51,538,822
|
2.0
|
51,538,822
|
2.0
|
|||||
$0.24
|
32,546,250
|
0.3
|
32,546,250
|
0.3
|
|||||
Total
|
157,549,644
|
156,341,311
|
Total
|
1
Year
Or Less
|
More than 1 Year
|
||||||||||
Deferred
Compensation
|
$ | 57,500 | $ | 57,500 | $ | - | ||||||
Office
Lease
|
37,182 | 21,246 | 15,936 | |||||||||
Total
|
$ | 94,682 | $ | 78,746 | $ | 15,936 |
10.1
|
Amendment
to Stock Purchase Warrant with Dr. Richard Caruso. Registrant
incorporates by reference Exhibit 10.1 to Form 8-K filed August 18,
2008.
|
10.2
|
Employment
Agreement between the Company and Stephen D. Barnhill, M.D., dated August
15, 2008. Registrant incorporates by reference Exhibit 10.2 to
Form 8-K filed August 18, 2008.
|
10.3
|
Option
Award to Stephen D. Barnhill, M.D., dated August 15,
2008. Registrant incorporates by reference Exhibit 10.3 to Form
8-K filed August 18, 2008.
|
10.4
|
License
and Development Agreement by and between the Company and DCL Medical
Laboratories, LLC dated July 14, 2008. Registrant incorporates
by reference Exhibit 10.17 to Registration Statement on Form S-1 filed
September 19, 2008.
|
31.1
|
Rule
13a-14(a)/15(d)-14(a) Certifications of Chief Executive Officer and
Principal Financial Officer.
|
32.1
|
Section
1350 Certification of Chief Executive Officer and Principal Financial
Officer.
|
Health Discovery Corporation | ||||
Registrant | ||||
Date:
November 14, 2008
|
By:
|
/s/ Stephen D. Barnhill | ||
Printed Name: Stephen D. Barnhill M.D. | ||||
Title: Chief Executive Officer and Principal Financial Officer | ||||
Date: November 14, 2008
|
/s/ Stephen D.
Barnhill
|
Stephen
D. Barnhill, M.D.
|
|
Chief
Executive Officer and Principal Financial
Officer
|
/s/ Stephen D.
Barnhill
|
|
Stephen
D. Barnhill, M.D.
|
|
Chief
Executive Officer and Principal Financial
Officer
|