UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           Amendment No.2 FORM 10-KSB
     |X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
             ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
       |_| TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934.
                          HEALTH DISCOVERY CORPORATION
                          ----------------------------
               (Name of small business corporation in its charter)

<TABLE>
<CAPTION>
<S>                                                                  <C>
         TEXAS                                                       74-3002154
----------------------------------------------       ------------------------------------
(State or other jurisdiction of incorporation)       (I.R.S. Employer Identification No.)

1116 South Old Temple Road Lorena, Texas                               76655
--------------------------------------------         ------------------------------------
</TABLE>

                    Issuer's telephone number (512) 583-4500
                    Securities registered under Section 12(g)
                              of the Exchange Act:
                      COMMON STOCK, NO PAR VALUE PER SHARE

                                (Title of class)

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 |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10K-SB. |X|

State issuer's revenues for its most recent fiscal year. $ 0.00

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices for such stock, as of a specified date within the past 90
days. $21,688,360 as of February 27, 2004.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 67,776,128

Transitional Small Business Disclosure Format (Check one): Yes |_| , No |X|
<PAGE>

                                     PART I

                                EXPLANATORY NOTE:
This Amendment No. 2 to the Annual Report on Form 10-K of Health discovery
Corporation for the year ended December 31, 2003 has been filed to reflect the
change of dates to the Auditors opinion letter. A new opinion letter was
required because the auditor was not a member of the Public Company Accounting
Oversight Board (PCAOB) as required by the Sarbanes-Oxley Act. No material
changes have been made to the financial statements. All changes made reflect the
new rules required by PCAOB. Changes to notes in the auditors report reflect 8-K
and 10Q filings made by the company during 2004. Except as described above, no
other amendments are being made to the Annual Report on Form 10-K. This Form
10-K/A does not reflect events occurring after the filing of our Annual Report
on Form 10-K or substantively modify or update the disclosure contained in the
Annual Report on Form 10-K in any way other than as required to reflect the
amendments discussed above and reflected below.

ITEM 1. DESCRIPTION OF BUSINESS

Our History
We were organized under the name Direct Wireless Communications, Inc., in April
2001 by Direct Wireless Corporation, which licensed to us its technology for a
wireless telephone. In October 2001, Direct Wireless Corporation, then our sole
shareholder, pursuant to an effective registration statement under the
Securities Act of 1933, distributed its entire holdings of our common stock as a
stock dividend to its shareholders. As a result of the dividend, Direct Wireless
Corporation ceased to own any of our equity securities. The negative events that
occurred over the next several years in the communications industry made it
difficult for us to fund the advancement of our communication platform. As a
result, we made the decision to strategically change the overall direction of
our intended business activities. On September 25, 2003, we acquired all of the
assets of The Barnhill Group, LLC, which was owned by Stephen D. Barnhill, M.D.
Dr. Barnhill is a physician trained in laboratory medicine and clinical
pathology. He is a pioneer in the development of artificial intelligence and
pattern recognition computational techniques used in medicine, genomics,
proteomics, diagnostics and drug discovery. Following the acquisition, Dr.
Barnhill became our Chief Executive Officer and Chairman of our Board of
Directors. Also, immediately following our acquisition of The Barnhill Group,
our licensing rights to the telecommunications technology previously granted by
Direct Wireless Corporation were automatically terminated under the terms of the
license agreement. Additionally, at that time, all payments due to Direct
Wireless Corporation were terminated.
Subsequently, we amended our charter to change our name to Health Discovery
Corporation. Direct Wireless Communications (DWCM.OB) officially became Health
Discovery Corporation on November 6, 2003, at which time the new trading symbol
(HDVY.OB) became effective.
On August 29, 2003, we signed a binding letter of agreement to acquire the
assets of Fractal Genomics, a company founded by Mr. Sandy Shaw with patented
Fractal Genomics Modeling software. Fractal Genomics utilized its technology to
find, link and model patterns of similarity hidden in large amounts of
information, such as the clinical databases used for diagnostic and drug
discovery. Fractal Genomics has applied its technology to protein and pathway
discovery in leukemia and lung development, which could lead to the
identification of novel proteins that could be used to develop diagnostic
markers and drug targets. Our acquisition of Fractal Genomics was completed
December 30, 2003. Mr. Shaw currently serves as our Vice President, Fractal
Technology.
<PAGE>

Our Market
Developing and evaluating new drugs and medical therapies in less time and at
lower cost is of enormous potential benefit for modern healthcare. Genuinely new
products must pass a series of both in-vitro and in-vivo testing in order to
demonstrate their safety and effectiveness for a specific clinical application.
Historically, the endpoints of these trials were "traditional" ones tied to the
actual disease being evaluated, such as a decrease in mortality or an
objective/semi-objective decrease in clinical symptoms associated with the
condition. In the last 10 to 15 years, there has been a move by the U.S. Food
and Drug Administration (FDA) to incorporate other endpoints, including genes
that are biomarkers for the existence or absence of a particular disease, which
are nontraditional findings that are related to the presence or absence of
disease. Examples of successful application of biomarker data to therapeutic
evaluation include the drugs Betaseron for use against multiple sclerosis and
Herceptin in the treatment of breast cancer. The FDA began an initiative in 1987
designed to expedite approval for drugs. Initially utilized for drugs that would
combat the devastating AIDS epidemic, these initiatives measured alternative
factors such as biomarkers to essentially evaluate the effectiveness of new
therapeutics for diseases such as AIDS.
Our goal is to leverage the FDA's expedited approval process by producing more
relevant and predictable biomarkers for drug discovery. By speeding up approval,
new and better medicines and diagnostic markers can be developed for patients
worldwide.
Biomarkers have long played a significant role in drug discovery and
development, but recent advances have signaled the potential for significant
deepening of their role in terms of both broader application within particular
stages of the process and application across a broader spectrum of functions.
Even before the recent resurgence of interest in the subject, single-analyte
biomarkers had already made significant impacts on clinical studies as
surrogates for clinical endpoints. Recent advances in discovery of
multi-component biomarkers and single-molecule markers derived from them show
promise of providing greatly improved clinical sensitivity and specificity over
their pre-genomic forbears. One major difficulty with biomarker discovery
relates to the accessibility of patient samples. Whereas tissues from animal
models are usually readily available, human tumor specimens and human body fluid
specimens are often unavailable or inaccessible for most common diseases of
major commercial interest.
Another major difficulty is developing new mathematical tools capable of
handling the analysis of the terabytes of information being generated by the
genomic and proteomic analysis of clinical specimens that must be sifted through
to identify the key biomarkers that will provide important clues leading to the
identification of new diagnostic and drug targets, not only for cancer but for
other medically and commercially important diseases as well. An additional
difficulty in commercialization of newly discovered biomarkers is establishing
relationships at large US medical and cancer centers to validate the results in
a clinical setting. Validation studies are required to ensure that the markers
are valid for a large population. The validation process is characterized by
proving the efficacy of the newly discovered biomarkers in larger sample sets.
Access to these prestigious institutions for validation studies can often be
difficult to arrange.
Using our established relationships with top US medical and cancer centers and
our recent acquisition of fractal genomics computational technologies, our goal
is to overcome the difficulties encountered with biomarker discovery and become
the first company, to our knowledge, to perform the total process of
"first-phase" discovery by identifying a particular clinical problem to be
solved and performing the entire process leading to the identification of the
genes or proteins (called biomarkers), and the relationships among them (called
pathways) that are relevant to the solution of the medical problem as described
below. This process will consist of an assessment of the clinical problem, the
determination of the clinical trial set-up (the number of patients and what
medical conditions they represent), the proper selection and procurement of high
quality specimens for analysis, an analytical evaluation of the specimens
through laboratory tests to produce the clinical data, and the mathematical
evaluation of the data using our proprietary pattern recognition techniques such
as fractal geometric modeling to produce an accurate determination of the
relevant genes and proteins and the manners in which they interact.
<PAGE>

Once we discover these new biomarkers and pathways, we intend to immediately
file patent applications to protect the discoveries such as with the patents
filed for our Leukemia discovery. These patent, protected biomarkers and
pathways represent the products of our company. After our discovery is patent
protected, the process of selling or licensing the newly discovered biomarkers
and pathways will begin. The information will then be sold or licensed to
diagnostic companies for development into new state-of-the-art diagnostic assays
and the same information will be sold or licensed to pharmaceutical companies
for further development into the next generation of therapeutic targets.
Intellectual property is a key asset in diagnostic and drug discovery. Our
products will be based on intellectual property, which includes the discovered
biomarkers and pathways produced through our own internal research programs, as
well as joint discovery efforts with academic institutions, diagnostic and
pharmaceutical companies worldwide. Our discovery process has already been shown
to lead to the identification of biomarkers and pathways in leukemia and lung
development and we hope will be instrumental in diagnosing and treating patients
with devastating diseases like cancer, heart disease, obesity and AIDS.

Our Technologies

Using our technologies, we intend to become the first company to perform the
total process of identifying a particular clinical medical problem to be solved
and performing the entire process leading to the identification of the genes or
proteins (called biomarkers), and the relationships among them (called
pathways), that are relevant to the solution of the medical problem. This
process will consist of an assessment of the clinical problem, the determination
of the clinical trial set-up (the number of patients and what medical conditions
they represent), the proper selection and procurement of high quality specimens
for analysis, an analytical evaluation of the specimens through laboratory tests
to produce the clinical data, and the mathematical evaluation of the data using
pattern recognition techniques and fractal geometric modeling to produce an
accurate determination of the relevant genes and proteins and the manners in
which they interact.
Once we discover new biomarkers and pathways, we intend to file patent
applications to protect the discoveries. These patent protected biomarkers and
pathways represent the products of our company. After the discovery is patent
protected, the process of selling or licensing the newly discovered biomarkers
and pathways begins. The information will then be sold or licensed to diagnostic
companies for development into diagnostic assays and the same information will
be sold or licensed to pharmaceutical companies for further development as
potential drug targets. Our products will be based on intellectual property,
which includes the discovered biomarkers and pathways produced through our own
internal research programs, as well as joint discovery efforts with diagnostic
and pharmaceutical companies worldwide. Newly discovered and patent protected
biomarkers and pathways will then be sold or licensed to diagnostic and
pharmaceutical companies for further development into diagnostic tests or
therapeutic agents. Our discovery process has been shown to lead to the
identification of biomarkers and pathways in leukemia and lung development and
will be instrumental in diagnosing and treating patients with devastating
diseases like cancer, heart disease, obesity and AIDS.
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 will 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
<PAGE>

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.
The recent acquisition of Fractal Genomics brought us a fully functional patent
protected computational tool, which is now known as the Health Discovery Fractal
Genomics (HDFG) technology. This technology is designed to study complex
biological networks such as genomic and proteomic pathways in disease. A complex
network can be made up of genes or proteins inside a living organism. HDFG uses
this new approach toward modeling network behavior to rapidly generate diagrams
and software simulations that facilitate prediction and analysis of genomic and
proteomic data to facilitate diagnostic and drug discovery.
The HDFG modeling process starts out by creating a special mathematical surface
(the HDFG surface) where every point on the surface can be used to generate a
network model with varying degrees of scale-free and fractal properties. Using
user-supplied clinical data, models which best match the behavior of each node
are selected and represented by a point on the HDFG surface. These point-models
are then linked, compared, and combined to generate diagrams, which reflect the
behavior of genes or proteins in the entire network The end result of the HDFG
modeling process is biomarker and pathway discovery diagrams that represent
nodes in the network and directions of causality or "flow" through the network
such as which genes or proteins are "turning-on" or "turning -off" other
precursor and successor genes or proteins in the biological system. HDFG derived
diagrams expedite forecasting, analysis, and study of complex system behavior by
clearly displaying all hubs, links, and flow in the network. With this
knowledge, diagnostic companies can use the newly identified biomarkers to
create state-of-the-art tests to identify key genes and proteins involved in
certain diseases and pharmaceutical companies can explore new therapeutic drug
targets designed to interrupt ("turn-off") genes or proteins with undesirable
effects or promote ("turn-on") genes or proteins with desirable effects.
In addition, as a result of the Fractal Genomics acquisition, we are preparing
to begin validation studies, at MD Anderson Cancer Center, of the recently
discovered and patent protected set of leukemia genes, discovered using the
newly acquired HDFG technique, which was shown to separate ALL-T-cell leukemia
from ALL-B-cell leukemia with 100% accuracy. This gene set, now our intellectual
property, was originally presented to the medical and scientific world by Dr.
Herbert Fritsche, Chairman of our Scientific Advisory Board, a world-renowned,
expert in cancer markers and Professor at MD Anderson Cancer Center, at 31st
Meeting of the International Society for Oncodevelopmental Biology and Medicine
(ISOBM) in Edinburgh, United Kingdom.
To date, our HDFG technology has been successfully used to analyze databases
from MD Anderson Cancer Center, St. Jude Children's Hospital and the Alvin J.
Siteman Cancer Center at Washington University. We recently entered significant
collaborations for biomarker discovery with MD Anderson Cancer Center, Stanford
University and the University of Miami and will be using our HDFG technology to
analyze databases relating to prostate cancer, leukemia, AIDS related dementia,
and lymphatic insufficiency. All of these biomarker discovery collaborations
brought Health Discovery Corporation contracts with either joint ownership in
the discovery or the right to a world wide exclusive license to commercialize
the discovery 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
<PAGE>

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 first level of discovery is assessment of the clinical dilemma.
Is the desired biomarker or pathway to be identified related to early diagnosis,
metastasis, treatment response or some other aspect of a given disease process?
Based on the clinical question to be answered along with the incidence,
prevalence and nature of the particular disease, we will establish a clinical
study with the appropriate number of necessary specimens. We expect that these
studies will provide statistically significant results once the biomarker and
pathway discovery is completed.
The second level of discovery is the proper identification and procurement of
the most relevant and professionally collected clinical specimens. Based on the
clinical dilemma to be solved, does the appropriate clinical trial require
blood, serum, aspirate fluid, tissue or some other clinically relevant specimen?
Once the correct decision is made, we will contractually procure the specimens
necessary for the discovery from highly reputable institutions, where we believe
proper collection and informed consent are completed under the strictest
scientific protocol.
The third level of discovery is the analytical component.
The clinical specimens must then be analyzed and converted into relevant
clinical data. We will determine which analytical method is appropriate for the
most successful biomarker and pathway discovery. The techniques we currently
expect to use include mass spectroscopy, MALDI, SELDI, DNA methylation, gene
chip analysis, 2-D Gel Electrophoresis, as well as other proprietary techniques
developed by companies and academic institutions with which we have
relationships. We will constantly monitor improvements in these techniques
worldwide.
The fourth level of discovery is the computational component.
The data generated from the analytical component must then be computationally
analyzed for the discovery of new biomarkers, patterns among those biomarkers
and causality pathways. We will decide which of the current leading
computational algorithms, such as our HDFG techniques, are best suited to solve
the particular clinical dilemma in question. The data is then computationally
analyzed, and the new biomarkers and pathways are discovered and patent
protected.
The fifth level is defining the clinical validity and utility of discovered
biomarkers. Biomarkers uncovered through the four stages of discovery will be
subsequently validated independently in larger,
clinically relevant populations. Clinical validity of a biomarker is confirmed
by its presence in the clinical condition in question and its ability to
differentiate one disease state from another, or a diseased state from a healthy
state. We hope that markers validated by our processes will provide: vastly
improved diagnostic capabilities; may identify potential therapeutic targets for
pharmaceutical intervention (e.g. membrane signaling proteins and inhibitors);
and markers suitable for monitoring disease progression following therapeutic
intervention. Application of clinically validated biomarkers in such a manner
will result in improved individual patient care and the advancement of the field
of personalized medicine. This unique approach to biomarker discovery and its
additional validation in relevant clinical samples advances the commercial
potential of biomarkers we uncover to diagnostic and therapeutic partners.
Integration of the five levels of biomarker discovery results in improved
efficiencies in translation of this information into commercial and medically
valuable products.
Our Strategic Agreements
In keeping with our corporate goal of building strong partnerships for biomarker
discovery, we have signed four biomarker discovery agreements in less than five
<PAGE>

months with strong academic centers of excellence in the United States,
including MD Anderson Cancer Center, Stanford University and the University of
Miami. All of these agreements include either joint ownership in any biomarker
or pathway discovered or rights to an exclusive worldwide license to our
discovery. Once we secure a contract with an academic institution for biomarker
and pathway discovery with commercialization rights, we begin negotiating these
commercialization rights to our discoveries with diagnostic and pharmaceutical
companies worldwide.
In October 2003 we signed our first Agreement with M.D. Anderson Cancer Center.
With this agreement we will analyze a gene expression database to identify new
biomarkers and pathways involved in leukemia. Under the terms of the agreement,
M.D. Anderson, has granted us a first option to obtain an exclusive worldwide
royalty-bearing commercial license to commercialize any discovered biomarkers or
pathways we identify.
In January 2004 we entered into our second Biomarker and Pathway Discovery
Agreement with The University of Texas, M.D. Anderson Cancer Center in Houston
Texas. Under the terms of the agreement, The University of Texas, M.D. Anderson
Cancer Center, has again granted us a first option to obtain an exclusive
worldwide royalty-bearing commercial license to commercialize any discovered
prostate cancer biomarkers or pathways identified by us utilizing our
proprietary HDFG computational techniques. This second collaboration with MD
Anderson Cancer Center will give us access to a new systems biology approach for
data analysis for new biomarker and pathway discovery in prostate cancer. We
intend to use the findings of this study to develop new diagnostic approaches
for prostate cancer and improve the clinical management of these patients. U.S.
Cancer Statistics: 2000 Incidence recently released by the Department of Health
and Human Services shows that prostate cancer is the leading cancer overall in
men in the United States and according to the National Institutes of Health, in
1997, the estimated number of new cases of prostate cancer in the United States
is 209,900, and the estimated number of deaths from the disease is 41,800. The
current market for prostate cancer testing with PSA, the biomarker currently
used to diagnose prostate cancer, is estimated to be approximately $350 million
annually around the world.
In March 2004 we entered into an agreement with Stanford University to use our
proprietary and patent protected HDFG computational techniques to identify new
patterns of biomarkers in lymphatic insufficiency and its response to
therapeutic lymphangiogenesis. According to the agreement, ownership of Research
Program Inventions conceived, discovered or reduced to practice under the
Research Program will be determined based on inventorship. As such, any
invention discovered using our analytical tools on this Stanford database will
be jointly owned by Stanford and us. According to the World Health Organization,
lymphedema affects 250 million people worldwide. Others estimate that one in
every twenty-five will suffer from some form of lymphedema during their
lifetime. The M.D. Anderson Cancer Center in Houston, Texas reports that
approximately 15% of all women with breast cancer will develop lymphedema over
the course of their lifetime and that lymphedema resulting from prostate cancer
is on the rise.
In March 2004 we signed an Agreement with The University of Miami to use Health
Discovery Corporations proprietary and patent protected HDFG computational
techniques to identify new patterns of biomarkers in AIDS Related Dementia. It
is hoped that this newly discovered information will allow physicians to better
understand the pathogenesis of AIDS Related Dementia and will assist in the
diagnosis and treatment of this devastating disease. Under the terms of the
Agreement, The University of Miami has granted us joint ownership on any
product, invention, discovery or new use arising out of or developed utilizing
our unique computational methods.
Estimates of the incidence of HIV-associated dementia vary, depending on the
definition of dementia being used. Researchers from the John Hopkins University
have estimated that 15% of HIV-infected people may develop dementia and that 30%
may show some signs of neurological impairment.
In addition, as a result of the Fractal Genomics acquisition, we are preparing
to begin validation studies, at MD Anderson Cancer Center, of the recently
discovered and patent protected set of leukemia genes, discovered using the
newly acquired HDFG technique, which was shown to separate ALL-T-cell leukemia
<PAGE>

from ALL-B-cell leukemia with 100% accuracy. This gene set, now our intellectual
property, was originally presented to the medical and scientific world by Dr.
Herbert Fritsche, Chairman of our Scientific Advisory Board, a world-renowned,
expert in cancer markers and Professor at MD Anderson Cancer Center, at 31st
Meeting of the International Society for Oncodevelopmental Biology and Medicine
(ISOBM) in Edinburgh, United Kingdom.

ITEM 2. DESCRIPTION OF PROPERTY.
We do not own any real property. Our administrative office is located at the
personal office of our Chief Administrative Officer, Robert S. Braswell IV 1116
S. Old Temple Road Lorena, Texas 76655, telephone no. (512) 583-4500. Our
principal executive office is currently located at 6709 Waters Avenue, Savannah,
Georgia 31406, telephone no. (866) 953-9031.

ITEM 3. LEGAL PROCEEDINGS.
None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 1, 2003, the holders of 41,541,567 shares of the 59,751,128 shares of
outstanding common stock (69.5%), by written consents, approved the amendment of
our Articles of Incorporation to change our name from Direct Wireless
Communications, Inc., to Health Discovery Corporation.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

      (a)   Our common stock is traded on the OTC Bulletin Board; symbol
            HDVY.OB. The range of bids for our common stock, as reported on
            Bloomberg.com during each quarter of the last two fiscal years. was
            as follows.

                                    High Bid                           Low Bid
                                   ----------                          --------
First Quarter 2002                      $ .47                             $.13

Second Quarter 2002                     $ .21                             $ .04

Third Quarter 2002                      $ .14                             $ .06

Fourth quarter 2002                     $.10                              $.02

First quarter 2003                      $ .07                             $.025

Second quarter 2003                     $ .045                            $ .02

Third quarter 2003                      $ .15                             $ .02

Fourth Quarter 2003                     $ .60                             $.06

(b) At December 31, 2003, there were 322 holders of record of our common stock.

(c) We have not paid any cash dividends since inception.

ITEM 6. PLAN OF OPERATION.
<PAGE>
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 after the identification
and patenting of new biomarkers. We did, however, secure both joint ownership
rights and/or first options for worldwide exclusive rights to our discoveries in
these agreements. We intend to fund our operations though a private offering of
our common stock under rules providing exemptions for such offerings.

ITEM 7. FINANCIAL STATEMENTS.

Financial statements appear at pages F1 through F9 of this Report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.

Our executive officers and directors are:

<TABLE>
<CAPTION>

Name                                Age     Position
<S>                                 <C>     <C>
Stephen D. Barnhill, M.D.           44      Chief Executive Office Chairman of the Board

David Cooper, M.D., Ph.D.           49      President and Chief Medical Officer

Robert S. Braswell, IV              48      Chief Administrative Officer, Director, Secretary and Treasurer

Sandy Shaw                          49      Vice President Fractal Technologies

Joe Fanelli                         42      Director of Corporate Development
</TABLE>

The present directors were appointed in May 2001 and November 2003 and will
serve until their successors are elected at an annual meeting of the
shareholders. Thereafter directors will serve a term of one year.

Stephen D. Barnhill, M.D., Chief Executive Officer and Chairman of the Board and
Medical Director of Health Discovery Corporation is a physician trained in
Laboratory Medicine and Clinical Pathology. He is a Pioneer in the development
and use of Artificial Intelligence, Pattern-Recognition and Computational
Techniques used in Medicine, Genomics, Proteomics, Diagnostics and Drug
Discovery.

Dr. Barnhill is or has been a Fellow of the American College of Physician
Inventors, the American College of International Physicians, the American
Medical Association, the American College of Physician Executives, the American
Association of Artificial Intelligence, the American College of Managed Care
Medicine, the Association of Clinical Scientists, the American Society of
Contemporary Medicine and Surgery, the American Society of Law, Medicine and
Ethics, the Southern Medical Society, the American Federation for Clinical
Research and the National Federation of Catholic Physicians.
<PAGE>

Dr. Barnhill founded the Barnhill Clinical Laboratories in 1988 and served as
Chairman, CEO, President and Medical Director. This Laboratory was later
acquired by Corning-Metpath in 1989 and after the acquisition he served as
Medical Director of this Clinical Laboratory until 1992. This Clinical
Laboratory, now owned by Quest Diagnostics, continues to be the largest and
busiest Clinical Laboratory in the Savannah Georgia area.

In 1992, Dr. Barnhill founded National Medical Specialty Laboratories and served
as Chairman, CEO, President, and Medical Director. This Research Laboratory was
founded to utilize pattern-recognition mathematics and artificial intelligence
techniques in cancer diagnosis. Dr. Barnhill is an inventor on the very first
patents issued by the United States Patent and Trademark Office for the use of
neural networks in medicine. This company was acquired by Horus Therapeutics; a
New York based Pharmaceutical Company. Dr. Barnhill served as Executive
Vice-President and Chairman of the Scientific Advisory Board for Horus
Therapeutics until 1998. Johnson & Johnson later acquired the Horus patents
invented by Dr. Barnhill.

In 1999, Dr. Barnhill founded and served as Chairman, President and CEO of
Barnhill BioInformatics, Inc. Barnhill BioInformatics, Inc. later became
Barnhill Genomics, Inc. and BioWulf Technologies, LLC and raised over $13.5
Million in Private Placement funding. The primary focus of these Companies was
to utilize the next generation of artificial intelligence and
pattern-recognition techniques, known as support vector machines, to identify
genes that cause cancer. Dr. Barnhill is the sole inventor on the very first
patents issued by the United States Patent and Trademark Office for the use of
support vector machines in medicine. These Companies have six issued patents in
the United States, Europe and other foreign countries and approximately thirty
pending patents worldwide. From the summer of 2000 until he organized The
Barnhill Group L.L.C., in the summer of 2003, Dr. Barnhill was not engaged in
any professional activities as the result of a non-compete agreement signed by
Dr Barnhill when he left the employment of Barnhill Genomics, Inc.

David Cooper, M.D., Ph.D., became our President and Chief Medical Officer and a
member of the Board of Directors on October 30, 2003. For the past four years
Dr. Cooper has devoted his time to significant national and international work
aimed at bringing the new technologies of genomics and molecular biology closer
to patient care. In this time he consulted and held positions with a number of
biotechnology and genomics companies including Qiagen (Hilden, Germany)
Sequenom, Inc. (San Diego, CA and Hamburg, Germany), Samsung Advanced Institute
of Technology (Suwon, Korea), DynaMetrix (Stockholm, Sweden), Pluvita
Corporation (Bethesda, MD), diaDexus (Santa Clarita, CA), SomaLogic (Boulder,
CO), LumiCyte (Freemont, California), GeneLogic (Gaithersburg, MD), NimbleGen
Systems Iceland, LLC. (Reykjavik, Iceland), Gentra Systems (Minneapolis,
Minnesota). and The Marshfield Clinic (Marshfield, WI). Currently besides
continuing as President of his own consulting group, David L. Cooper and
Associates, Dr. Cooper is President and a member of the Board of Directors of
Healthcare Discovery Corporation (HDVY) (Savannah, Georgia). In addition he
serves on the Scientific Advisory Boards of Gentra Systems (Minneapolis,
Minnesota) and Specialty Laboratories (Santa Monica, California).

 Dr. Cooper served as the former Chief Science Officer and Chief Operating
Officer of Quest Diagnostics, Nichols Institute, in San Juan Capistrano,
California. While at Quest Diagnostics, Dr. Cooper coordinated the Nichols
Institute's move to an ISO 9001 company, expanded their HIV and genetic testing,
and reorganized the Nichols Institute Research and Test Development efforts into
a clinical specialty focus. Dr. Cooper also assisted in opening new markets in
<PAGE>

Asia, South America and Europe for Quest Diagnostics, Nichols Institute. He
served as Vice President and Chief Science Officer at diaDexus in Santa Clara,
California and Chief Medical Officer of NimbleGen Systems. While at NimbleGen
Systems, Dr. Cooper established NimbleGen Systems of Iceland, LLC, which
currently manufactures custom DNA arrays and related services to the scientific
research marketplace worldwide. Dr. Cooper also served as Senior Scientific
Advisor to Visible Genetics, Inc. of Toronto, Canada, where he assisted with the
development of the FDA approved Tru-Gene HIV genotyping system.

In academia, Dr. Cooper held tenured pathology faculty positions at Duke
University Medical Center and the University of Pittsburgh Medical Center. While
at the University of Pittsburgh, he founded the first division of Molecular
Pathology in the United States, assisted in founding and served as the first
chair of the Association for Molecular Pathology, and was editor and founder of
Molecular Diagnosis -- a journal devoted to the understanding of human disease
through the clinical application of molecular biology. His academic honors
include the prestigious Lichfield Lectureship, Oxford University, Oxford,
England. Dr. Cooper is the author of more than 100 scientific and medical
publications in molecular diagnostics and the development of novel gene
therapies which were supported by numerous grants including grants from the
National Institutes of Health, the American Cancer Society and the Department of
Defense Breast Cancer Initiative.

Robert S. Braswell IV is our Chief Administrative Officer, Secretary and
Treasurer. Mr. Braswell served as our President from April 2001 until the
acquisition of the Barnhill Group LLC, when he assumed his current positions. As
its President, he guided the creation of Direct Wireless Communications Inc.
(DWCI) and oversaw all administrative functions for both DWCI and Direct
Wireless Corporation. Mr. Braswell served as President of Direct Wireless
Corporation since December 1999 and a member of its Board of Directors since
January 1999. Prior to holding these positions, Mr. Braswell was an independent
businessman engaged in business evaluations, real estate development, home
construction while running a working ranch operation. His administrative
experience comes from eighteen years experience in the common carrier freight
business, working for Central Freight Lines, Inc. from 1974-1992. Mr. Braswell
graduated from the University of Houston in 1983 with a Bachelor of Business
Administration in Organizational Behavior Management.

Sandy Shaw - Vice President, Fractal Technology. Mr. Shaw has been a computer
scientist and software engineer for over 20 years, working at companies and
institutions such as Bell Labs, Lockheed Electronics, University of Hawaii, and
University of California, San Francisco, where he was a postgraduate researcher
in the field of bioinformatics. Mr. Shaw began studying dynamical systems theory
(chaos theory) as part of his graduate research in physics in the late
seventies. This later led to development of a fractal data compression algorithm
for commercial use in 1988, which in turn led to his current research in data
analysis and modeling using fractal surfaces.

From 1997 until 2000, Mr. Shaw did consulting work in contract programming where
he developed software for fractal-based methods of analyzing large datasets.From
2000 until 2001he was a bioinformatics researcher for the University of
California, San Francisco, testing fractal-based analysis methodology for use in
gene expression analysis. Mr. Shaw founded Fractal Genomics in 2001 in order to
extend and commercialize this research. Mr. Shaw received his B.S. in Physics
from University of Houston in 1976 and his M.S. ABD in Physics from SUNY at
Stony Brook in 1978

Joe Fanelli - Director of Corporate Development. Mr. Fanelli brings to our
company extensive experience in strategic planning, as well as business and
product development in the biotechnology arena. Specifically, Mr. Fanelli has
been in executive management positions for more than 20 years, including Beckman
Instruments, which was acquired by SmithKline. He then joined Cetus Corporation
as Director and General Manager of their Instrument Division which was acquired
three years later, along with the PCR amplification technology, by Perkin Elmer.
<PAGE>

Thereafter, Mr. Fanelli served at the Vice President level of Marketing, Sales
and Business Development at emerging growth companies in the biotechnology
market sector including American Bionetics, Cangene Corporation, Microgenics
Corporation, Quantum Biotechnologies 1997-1999, Base 4 Bioinformatics 1998-2000
and Structural Bioinformatics 2000-2002. He participated in the acquisition of
two companies and played a key role in starting and growing multi-million dollar
biomedical research companies. In 2002 Mr. Fanelli started the, Lighthouse
Consulting Group whose expertise is the commercial focus on emerging/converging
drug discovery (especially genomics), biotech and diagnostic technologies.
Specializing in business development, assessment, planning, beta site testing &
market introduction of advanced proteomic and bioinformatic solutions. Mr
fanelli joined Health Discovery Corporation in November 2003 to lead our
Corporate Development efforts. He holds a B.A in Biology and a Masters Degree in
Biological Sciences from California State University

Scientific Advisory Board Our executive officers, directors and senior
management are supported and enhanced by the technical expertise provided by
members of our Scientific Advisory Board. We believe that the experience,
expertise and contacts of the members of our Scientific Advisory Board will
facilitate strategic alliances, customer license agreements and other
collaborative arrangements that will benefit our company.

Herbert A. Fritsche, M.D. - Chairman. Dr. Fritsche is a professor of Laboratory
Medicine and Chief of the Clinical Chemistry Section at The University of Texas,
M.D. Anderson Cancer Center in Houston, Texas. During his 35 years at M.D.
Anderson Cancer Center, Dr. Fritsche focused his research activities on the
development and validation of cancer diagnostics. Dr. Fritsche participated in
the validation and FDA clearance process for every commercial serum tumor marker
product currently in use in the United States. He served as President of the
Clinical Ligand Assay Society (CLAS) and on various committees for both the CLAS
and the American Association for Clinical Chemistry (AACC).

         Dr. Fritsche is a fellow of the National Academy of Clinical
Biochemistry and was awarded the National Award for Contributions in Education
by the AACC; the Outstanding Clinical Chemist Award by the Texas Section, AACC;
a Dean's Excellence Award for the University of Texas Graduate School of
Biomedical Science; a Distinguished Scientist Award from the CLAS; and the
Johnson and Johnson Award for Outstanding Research and Contributions to Clinical
Biochemistry from the National Academy of Clinical Biochemistry. Dr. Fritsche
currently serves on the Expert Panel for developing Tumor Marker Practice
Guidelines for the American Society of Clinical Oncology, and the Laboratory
Practice Guidelines Committee for the National Academy of Clinical Biochemistry.
Dr. Fritsche also serves as a consultant/advisor to the National Cancer
Institute and other international diagnostic companies and biotech start-up
companies and serves on the editorial board of six international scientific
journals.

Isabelle Guyon, Ph.D. Dr. Guyon is an internationally recognized expert in
statistical data analysis, pattern recognition and machine learning. She is an
acknowledged leader in her field serving as an expert with the European
Commission to review grant proposals and serves as Vice-President of the
International Unipen Foundation. While Dr. Guyon was a Principle Investigator at
AT&T Bell Labs, she pioneered applications of neural networks to handwriting
recognition for pen computers. In addition, while collaborating with Bernhard
Boser and Vladimir Vapnik, she invented the Support Vector Machine method of
data classification, which has become an internationally validated reference
textbook method of machine learning which is currently used in drug and
diagnostic biomarker discovery world-wide.

Ramananda K. Madyastha, M.D., Ph.D. Dr. Madyastha is the Recipient of the Raja
Ravi Sher Singh of Kalsia Memorial Cancer Research Prize for outstanding
<PAGE>

contributions in the field of cancer research. He served on the Faculty of the
Basic and Clinical Immunology and Microbiology Department at the Medical
University of South Carolina. Dr. Madyastha has been an active member of the
American Association of Cancer Research for more than 20 years. In addition, he
is Board Certified by the American Board of Managed Care Medicine and is a
licensed Clinical Laboratory Director. Dr. Madyastha was involved in the
development of the first neural network based diagnostic tests for prostate and
ovarian cancer.

Kary Mullis, Ph.D. Dr. Mullis was the recipient of the 1993 Nobel Prize in
Chemistry for his invention of polymerase chain reaction (PCR) hailed as one of
the greatest scientific accomplishments of the twentieth century, one that
revolutionized genetic science and engineering. PCR was a commercial success,
with the original patent being sold to Hoffman LaRoche for $300 million,
generating hundreds of millions of dollars in revenues from royalties. In
addition, Dr. Mullis was awarded the Japan Prize, one of international sciences
most prestigious awards, the Thomas A. Edison Award, California Scientist of the
Year Award, The National Biotechnology Award, The Gairdner Award in Toronto,
Canada, the R&D Scientist of the Year Award, the William Allan Memorial Award of
the American Society of Human Genetics and the Preis Biochemische Analytik of
the German Society of Clinical Chemistry and Boehringer Mannheim. Dr. Mullis was
inducted into the National Inventors Hall of Fame in 1998.

Bernhard Scholkopf, Ph.D. Dr. Scholkopf is a director at the Max Plank Institute
for Biological Cybernetics in Tubingen, Germany and an elected member of the Max
Plank Society. Dr. Scholkopf was recently appointed Honorary Professor for
machine learning at the Technical University in Berlin and has taught at the
Humboldt University in Berlin. Dr. Scholkopf won the Prize for Best Scientific
Project at the German National Research Center for Computer Science and his
thesis on Support Vector Machines won the annual dissertation prize of the
German Association for Computer Science. In addition, he is a former research
scientist at AT&T Bell Labs, GMD-FIRST in Germany, the Australian National
University, and Microsoft Research in the United Kingdom.

Tin-Chuen Yeung, Ph.D., MBA Dr. Yeung is a pharmacologist, MBA and currently the
head of Strategic Development, Life Sciences for the Chicago Law Firm, Bell,
Boyd & Lloyd, LLC. He is admitted to practice patent law before the U.S. Patent
Bar. At Bell, Boyd, and Lloyd, LLC he is a member of the intellectual property
group responsible for patent prosecution in the areas of biotechnology,
nanotechnology, pharmaceuticals, drug delivery technologies, medical devices and
other life sciences. Prior to his current position, Dr. Yeung served as
President of Everest International, Inc. consultant to Fortune 500 medical
technology companies and start-up biotechnology companies. He also served as
Director of Strategy and Business Development for the Biosciences Division at
Baxter International, Inc, where he managed the strategic development for
world-wide development, marketing and manufacturing of recombinant protein
products, as well as serving as Director of Corporate Development for Baxter,
responsible for management of Baxter's acquisitions, technology development,
licensing and strategic alliances. Dr. Yeung was formerly a research fellow at
Harvard Medical School, Department of Pharmacology, studying the action and
toxicity of anti-cancer drugs.

ITEM 10. EXECUTIVE COMPENSATION.

We do not have any revenue producing operations at the present time, and it may
be some period of time before revenues are produced in amounts sufficient to pay
executive salaries. When we have sufficient revenues we intend fix compensation
levels for our executive officers at appropriate amounts.

During the fiscal year 2003 we granted to our President, Dr. David Cooper, and
our Director of Corporate Development, Joe Fanelli immediately exercisable
<PAGE>

options to purchase our common stock. In each case the options are for 600,000
shares. Mr. Cooper and Mr. Fanelli both have the right to earn additional option
grants upon the occurrence of specified conditions.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth information concerning the beneficial ownership
of our common stock as of February 27, 2004 by (i) each of our directors, and
(ii) all of our officers and directors as a group. Other than Dr. Barnhill, Mr.
Braswell and Mr. Shaw no person is known to us to own shares of our common stock
with 5% or more of the voting power of our company.

At February 27, 2004, there were 67,576,128 shares outstanding

                                            Number of Shares

Name and Position                   Beneficially Owned      Percent of Class (1)
-----------------                   ------------------      --------------------

Dr. Stephen D. Barnhill            29,825,564 Indirect(2)             44.00%
Chairman of the Board,
Chief Executive Officer
and Medical Director
2 Springfield Place
Savannah, GA 37411

David Cooper, M.D., Ph.D.             600,000 Direct(3)               0.009%
President
Chief Medical Officer Director
5842 Tree Line Drive
Fitchberg, Wisconsin 53711

Robert S. Braswell IV               2,602,153 Direct (4)               3.84%
Chief Administrative Officer          780,000 Indirect (5)             1.15%r
Director, Secretary and Treasurer
One Chaparral Place
Lorena, TX 76655

Sandy Shaw                          3,825,000 Direct                   5.64%
Vice President and Director
of Fractal Technology
111 Commonwealth Avenue
San Francisco, CA 94118

Joe Fanelli                           850,000 Direct (6)              0.012%
Director of Corporate Development
8150 Harmony Grove Road
Escondido CA 92029

All officers and directors as      38,482,717                         56.78%
a group ( five persons)

----------
(1)   Includes 600,000 options Granted to Dr. Cooper and 600,000 options granted
      to Mr. Fanelli, all of which are presently exercisable.
<PAGE>

(2)   These shares are held by Barnhill Group LLC which is wholly owned by Dr.
      Barnhill

(3)   These share are represented by presently exercisable options.

(4)   Includes 11,667 shares are owned by Mr. Braswell and his wife as joint
      tenants.

(5)   Includes 226, 676 shares are owned by Mr. Braswell's wife, 140,000 shares
      owned by a corporation controlled by Mr. Braswell and 413,324 shares owned
      by his minor children.

(6)   These share are represented by presently exercisable options.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On August 15, 2003, we entered into an agreement with Dr. Stephen Barnhill and
the Barnhill Group LLC to purchase the assets of Barnhill Group LLC. As a part
of the agreement the Barnhill Group LLC was to receive 29,825,564 shares of our
common stock. The asset acquisition agreement was completed on September 24,
2003. The restricted shares of our common stock were issued to the Barnhill
Group LLC on August 26, 2003. As a result of this transaction we acquired a 49%
interest in Fractal Genomics. Dr. Barnhill currently serves as our Chief
Executive Officer and the Chairman of our Board of Directors.

On August 29, 2003, we signed a binding letter of agreement to acquire all the
assets of Fractal Genomics, a company founded and owned 51% by Mr. Sandy Shaw,
in exchange for 3,825,000 shares of our common stock and a note for $500,000
payable quarterly in amounts of $62,500. Our acquisition of the assets was
completed on December 30, 2004. Mr. Shaw currently serves as a Director and as
our Vice President, Fractal Technology.
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(A) EXHIBITS.

3.1 Articles of Incorporation. Registrant incorporates by reference Exhibit 3.1
to Registration Statement on Form SB-2, File No. 333-62216, filed 6/04/2001.

3.1 (a) Articles of Amendment to Articles of Incorporation Registrant
incorporates by reference Exhibit 2.2 to Form10-QSB, File No. 333-62216, filed
11/14/2001.

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 3/30/2004.

3.2 By-Laws. Registrant incorporates by reference Exhibit 3.2 to Registration
Statement on Form SB-2, File No. 333-62216, filed 6/04/2001.

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 6/04/2001.

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 3/30/2004

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 6/04/2001.

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 8/15/2001

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 3/30/2004

4.3(b) Non Qualified stock option agreements dated October 30,2003 between
registrant and Joe Fanelli. Registrant incorporates by reference Exhibit 4.3(b)
to form 10-KSB File No. 333-62216 filed 3/30/2004

10.1(a) Technology License Agreement dated May 15, 2001, as amended July 17,
2001 between Direct Wireless Corporation and Direct Wireless Communications,
Inc. Registrant incorporates by reference Exhibit 10.1(a) to Amendment No.1 to
Registration Statement on Form SB-2, File No. 333-62216, filed 7/24/ 2001.

10.2 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 3/30/2004

10.3 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 3/30/2004

23. Consent of Clyde Bailey P.C. Certified Public Accountant

24. Certifications of Chief Financial Officer

(B) REPORTS ON FORM 8-K.

8-K Filed September 12, 2003. Item 1 Change in Control of Registrant. Registrant
incorporates by reference reports on form 8-K to form 10-KSB File No. 333-62216
filed 3/30/2004

8-K Filed October 9, 2003 Item 2 Acquisition or Disposition of Assets.
Registrant incorporates by reference reports on form 8-K to form 10-KSB File No.
333-62216 filed 3/30/2004
<PAGE>

                          HEALTH DISCOVERY CORPORATION
            (FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
                              FINANCIAL STATEMENTS
                                DECEMBER 31, 2003
                                TABLE OF CONTENTS

                                                               Page

                                                               ----

Independent Auditors' Report                                   F-2

Balance Sheet                                                  F-3

Statement of Loss                                              F-4

Statement of Changes in Stockholders' Equity                   F-5

Statement of Cash Flows                                        F-6

Notes to Financial Statements                               F-7-12

                                       F-1

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Health Discovery Corporation

I have audited the accompanying balance sheet of Health Discovery Corporation
("Company"), a Development Stage Enterprise, (formerly Direct Wireless
Communications, Inc.)as of December 31, 2003 and the related statements of
operations, statement of stockholders' equity, and the statements of cash flows
for the twelve month periods ended December 31, 2003 and 2002 and from inception
(April 6, 2001) to December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on my audit.

I conducted my audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. I believe that my
audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2003
and the results of its operations and its cash flows for the twelve month period
ended December 31, 2003 and 2002 and from inception (April 6, 2001) to December
31, 2003 in conformity with accounting principles generally accepted in the
United States.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has suffered recurring losses from
operations and negative working capital that raise substantial doubt about its
ability to continue as a going concern. This is further explained in the notes
to financial statements. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

                                                           Clyde Bailey P.C.
                                                           -----------------

San Antonio, Texas
------------------------------------

February 27, 2004
------------------------------------

Except for Notes A, F, H, I, J, and K
------------------------------------

January 5, 2005
------------------------------------

                                       F-2

<PAGE>

HEALTH DISCOVERY CORPORATION                                             Page 2
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(A Development Stage Company)
Balance Sheet
December 31, 2003

<TABLE>
<CAPTION>
                                                                                       2003
                                                                                  ---------------
ASSETS:
<S>                                                                               <C>
Current Assets
     Cash                                                                         $        76,589
                                                                                  ---------------
          Total Current Assets                                                             76,589
                                                                                  ---------------

Other Assets
     Patent Costs                                                                             510
     Accumulated Amortization                                                                 (14)
     Other Intangibles                                                                  1,364,261
                                                                                  ---------------
                                                                                        1,364,757
                                                                                  ---------------
          Total Assets                                                            $     1,441,346
                                                                                  ===============

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current Liabilities
     Accounts Payable - Trade                                                     $         5,587
     Accrued Liabilities                                                                    5,495
     Current Portion of Long-Term Debt                                                    246,279
                                                                                  ---------------
          Total Current Liabilities                                                       257,361
                                                                                  ---------------

Long-Term Debt, Less Current Portion                                                      253,721
                                                                                  ---------------
          Total Liabilities                                                               511,082
                                                                                  ---------------

Stockholders' Equity
    Common Stock, No Par Value, 200,000,000 Shares Authorized 66,576,128 Shares
         Issued and Outstanding                                                         1,822,023
    Additional Paid-In Capital                                                            216,719
    Deficit Accumulated During Development Stage                                       (1,108,478)
                                                                                  ---------------
          Total Stockholders' Equity                                                      930,264
                                                                                  ---------------
          Total Liabilities and Stockholders' Equity                              $     1,441,346
                                                                                  ===============
</TABLE>

   The Accompanying Notes are an Integral Part of These Financial Statements.

                                       F-3

<PAGE>

<TABLE>
<CAPTION>
HEALTH DISCOVERY CORPORATION                                             Page 3
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(A Development Stage Company)
Statements of Loss                                                                                                 April 6, 2001
For the Years Ended December 31, 2003 and 2002 and                           Year Ended         Year Ended         (Inception) to
the Period from April 6, 2001 (Date of Inception) to December                December 31,       December 31,         December 31,
31, 2003
                                                                                  2003               2002                 2003
                                                                            -------------------------------------------------------
<S>                                                                         <C>                             <C>     <C>
Revenues
     Capital Gain (Loss) on Sale of Assets                                  $             0                 198     $           (20)

     Dividend Income                                                                      0                  56                  64
     Miscellaneous Income                                                                50                 326                 326
                                                                            -------------------------------------------------------
Total Revenues                                                                           50                 580                 420
                                                                            -------------------------------------------------------

Expenses
     Administrative Fees                                                             15,300              20,400              50,719

     License Fees                                                                    16,260              47,560             240,800

     Outside Services                                                                76,625               1,484              80,841

     Professional and Consulting Fees                                                57,270             268,960             641,597

     Salaries and Wages                                                              26,667                   0              26,667

    Other General and Administrative Expenses                                        37,523              17,944              68,274
                                                                            -------------------------------------------------------
          Total Expenses                                                            229,645             356,348           1,108,898
                                                                            -------------------------------------------------------
Net Loss Before Provision for Federal Income Tax                                   (229,595)           (355,768)         (1,108,478)

Provision For Federal Income Tax                                                          0                   0                   0
                                                                            -------------------------------------------------------
Net Loss                                                                    $      (229,595)    $      (355,768)    $    (1,108,478)
                                                                            ========================================================

Average Outstanding Shares                                                       33,776,646          24,427,041          19,809,111

Loss Per Share                                                              $         (0.01)    $         (0.01)    $         (0.06)

Fully Diluted Loss Per Share                                                $         (0.01)    $         (0.01)    $         (0.06)
</TABLE>


   The Accompanying Notes are an Integral Part of These Financial Statements.

                                       F-4
<PAGE>
<PAGE>

HEALTH DISCOVERY CORPORATION                                              Page 4
Page 5
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the Period from April 6, 2001 (Date of Inception) to
December 31, 2003

<TABLE>
<CAPTION>
                                                                                             Deficit
                                                                                            Accumulated
                                                        Common Stock          Additional       During         Total
                                                 --------------------------    Paid-In      Development   Stockholders'
                                                   Shares          Amount       Capital        Stage          Equity
                                                 -----------    -----------   -----------    -----------    -----------
<S>                                               <C>           <C>           <C>           <C>            <C>
Balance - April 6, 2001 (Inception)                        0    $         0   $         0    $         0    $         0
Contributed Services
                                                           0              0        15,019              0         15,019
Stock Issued for Cash
                                                   2,001,650        168,645             0              0        168,645
Stock Issued as a dividend to the Shareholders
of to Direct Wireless Corporation                 10,138,975              0             0              0              0
Stock Issued to Officers of Direct Wireless
Corporation                                        7,100,000              0             0              0              0
Stock Issued for Services
                                                   2,213,995        315,496             0              0        315,496

Stock Held In Escrow
                                                      77,500              0             0              0              0
Cash Received for Sale of Escrowed Shares
                                                      22,500          9,335             0              0          9,335
Net Loss
                                                           0              0             0       (523,115)      (523,115)
                                                 -----------    -----------   -----------    -----------    -----------
Balance - December 31, 2001                       21,554,620        493,476        15,019       (523,115)       (14,620)
                                                 ===========    ===========   ===========    ===========    ===========

Contributed Services                                       0              0        20,400              0         20,400
Stock Issued for Cash                                467,500         87,810             0              0         87,810
Stock Issued for Services                          3,598,444        248,100             0              0        248,100
Stock Held in Escrow                               3,179,500              0             0              0              0
Cash Received for Sale of Escrowed Shares          1,020,500         24,280             0              0         24,280
Net Loss                                                   0              0             0       (355,768)      (355,768)
                                                 -----------    -----------   -----------    -----------    -----------
Balance - December 31, 2002                       29,820,564        853,666        35,419       (878,883)        10,202
                                                 ===========    ===========   ===========    ===========    ===========

Contributed Services                                       0              0        15,300             00         15,300
Stock Issued for Cash                              3,000,000         42,038       166,000              0        208,038
Stock Issued for Services                            530,000         26,150             0              0         26,150
Stock Issued for Other Intangibles                33,650,564        864,261             0              0        864,261
Stock Held in Escrow                              (3,257,000)             0             0              0              0
Cash Received for Sale of Escrowed Shares          2,832,000         35,908             0              0         35,908
Net Loss                                                   0              0             0       (229,595)      (229,595)
                                                 -----------    -----------   -----------    -----------    -----------
Balance - December 31, 2003                       66,576,128    $ 1,822,023   $   216,719    $(1,108,478)   $   930,264
                                                 ===========    ===========   ===========    ===========    ===========
</TABLE>

   The Accompanying Notes are an Integral Part of These Financial Statements.

                                       F-5

<PAGE>

HEALTH DISCOVERY CORPORATION                                              Page 5
Page 5
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(a Development Stage Company)
Statement of Cash Flows
For the Period from April 6, 2001 (Date of Inception) to December 31, 2003 and
Years Ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                                Year Ended       Year Ended     From Inception
                                                               December 31,     December 31,    (April 6, 2001)
                                                                12/31/03          12/31/02       to 12/31/03
                                                               -----------      -----------      -----------
<S>                                                            <C>                 <C>           <C>
Cash Flows From Operating Activities
Net Loss                                                       $  (229,595)        (355,768)     $(1,108,478)
Adjustments to Reconcile
Net Loss to Net Cash
  Provided by (Used for) Operating Activities:
          Services Contributed                                      15,300           20,400           50,719
          Services Provided for Stock                               26,150          248,100          589,746
          Patent Costs                                                (510)               0             (510)
          Amortization                                                  14                0               14
       Increase in Accounts Payable - Trade                         15,710            1,712            5,587
       Increase in Accrued Liabilities                               5,495                0            5,495
                                                               -----------      -----------      -----------
         Net Cash Provided (Used) by Operating Activities         (167,436)         (85,556)        (457,427)
                                                               -----------      -----------      -----------

Cash Flows From Investing Activities
Sales of Investments                                                     0            9,023                0
(Purchase) of Other Intangibles                                   (500,000)               0         (500,000)
                                                               -----------      -----------      -----------
          Net Cash Provided (Used) by Investing Activities        (500,000)           9,023         (500,000)
                                                               -----------      -----------      -----------

Cash Flows From Financing Activities
Proceeds from Notes Payable                                        500,000          (33,184)         500,000
Cash from Sale of Stock                                            243,946          112,090          534,016
                                                               -----------      -----------      -----------
 Net Cash Provided (Used) by Financing Activities                  743,946           78,906        1,034,016
                                                               -----------      -----------      -----------

 Net Increase in Cash                                               76,510            2,373           76,589

Cash, at Beginning of Period                                            79           (2,294)               0
                                                               -----------      -----------      -----------

Cash, at End of Period                                              76,589               79      $    76,589
                                                               ===========      ===========      ===========

Non-Cash Transactions:

Services Contributed for Administration                        $    15,300      $    20,400      $    50,719
                                                               ===========      ===========      ===========

Stock Issued for Professional and Consulting Services          $    26,150      $   248,100      $   589,746
                                                               ===========      ===========      ===========

Stock Issued for Other Intangibles                             $   864,261      $         0      $   864,261
                                                               ===========      ===========      ===========
</TABLE>

   The Accompanying Notes are an Integral Part of These Financial Statements.

                                       F-6

<PAGE>

HEALTH DISCOVERY CORPORATION                                              Page 6
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(a Development Stage Company)
Notes to Financial Statements
December 31, 2003

Note A - Summary of Significant Accounting Policies

NATURE OF OPERATIONS AND DESCRIPTION OF DEVELOPMENT STAGE ACTIVITIES

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. As described
in Item 1 of the filing, the Company has decided to abandon its efforts in the
telecommunications industry and acquired new technologies in the biotechnology
industry. During 2003, the Company acquired the assets of the Barnhill Group,
LLC and Fractal Genomics LLC in pursuit of it biotechnology focus.

BASIS OF ACCOUNTING

The financial statements of the Company have been prepared on the accrual basis
of accounting. As such, revenue is recognized as earned and expenses are
recorded when accrued. This basis of accounting conforms to generally accepted
accounting principles.

BASIS FOR ASSIGNING AMOUNTS TO EQUITY SECURITIES ISSUED FOR OTHER THAN CASH

Shares of common stock issued to individuals and/or companies for other than
cash have been assigned amounts equal to the fair value of the service provided
or the fair value of the shares of the Company issued, whichever was most
readily determinable.

CASH FLOWS

For the purpose of the cash flow statement, cash and cash equivalents represent
funds deposited in banks and investments maturing within three months.

USE OF ESTIMATES

Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities, and the reported
revenue and expenses. Actual results could differ from those estimates.

FEDERAL INCOME TAX

The Company has adopted the provisions of Financial Accounting Standards Board
Statement No. 109, Accounting for Income Taxes. The Company accounts for income
taxes pursuant to the provisions of the Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes", which requires an asset and
liability approach to calculating deferred income taxes. The asset and liability
approach requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax basis of assets and liabilities.

EARNINGS PER SHARE

The Company adopted Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which simplifies the computation of earnings per share requiring the
restatement of all prior periods.

Basic earnings per share are computed on the basis of the weighted average
number of common shares outstanding during each year.

                                       F-7

<PAGE>

HEALTH DISCOVERY CORPORATION                                              Page 7
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(a Development Stage Company)

Notes to Financial Statements
December 31, 2003

Note A - Summary of Significant Accounting Policies (Continued)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of financial instruments including marketable securities,
notes and loans receivables, accounts payable and notes payable approximate
their fair values at December 31, 2003.

LONG-LIVED ASSETS

Statement of Financial Accounting Standards No. 121 "Accounting for Impairment
of Long-Lived Assets to be Disposed of " requires, among other things,
impairment loss of assets to be held and gains or losses from assets that are
expected to be disposed of be included as a component of income from continuing
operations before taxes on income.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("Interpretation No. 46"), that clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. Interpretation No. 46 is
applicable immediately for variable interest entities created after January 31,
2003. For variable interest entities created prior to January 31, 2003, the
provisions of Interpretation No. 46 are applicable no later than July 1, 2003.
Interpretation No. 46 did not have an effect on the financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123" ("SFAS 148"). This Statement amends SFAS 123 to provide alternative methods
of transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation. In addition, SFAS 148 amends the disclosure
requirements of SFAS 123 to require prominent disclosures in both annual and
interim financial statements. Certain of the disclosure modifications are
required for fiscal years ending after December 15, 2002 and are included in the
notes to these consolidated financial statements.

Statement of Financial Accounting Standards SFAS No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities", SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity", were recently issued. SFAS No, 149, and 150 have no
current applicability to the Company or their effect on the financial statements
would not have been significant.

Note B - Related Party Transactions

Direct Wireless Corporation provided office space and administrative services to
the Company for the year until September 30, 2003. The estimated value for the
services provided totaled $15,300 for the year ended December 31, 2003 and are
recorded as administrative services in the accompanying financial statements.

Note C - Other Intangibles

On August 26, 2003 Health Discovery Corporation acquired the patents, patent
rights, all pending intellectual property, proprietary software, and websites of
Barnhill Group, LLC through the issue of 29,825,564 common stock shares of
Health Discovery Corporation (then known as Direct Wireless Communications,
Inc.). The purchase of Barnhill Group, LLC's assets was recorded at $596,511,
which was the market value of the shares issued at the date of acquisition. The
purchase is recorded as other intangibles in the accompanying financial
statements.

                                       F-8

<PAGE>

HEALTH DISCOVERY CORPORATION                                              Page 8
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(a Development Stage Company)
Notes to Financial Statements
December 31, 2003

Note C - Other Intangibles (Continued)

On September 30, 2003 Health Discovery Corporation acquired the patents, patent
rights, all pending intellectual property, proprietary software, and websites of
Fractal Genomics, LLC through the issue of 3,825,000 common stock shares of
Health Discovery Corporation (then known as Direct Wireless Communications,
Inc.). In addition to the common stock shares issued for the acquisition of
Fractal Genomics, LLC's assets, the Company agreed to execute a note for
$500,000 paid in quarterly installments to the seller. The purchase of Fractal
Genomics, LLC's assets was recorded at $267,750, which was the market value of
the shares issued at the date of acquisition plus the amount of the note. The
purchase is recorded as other intangibles in the accompanying financial
statements.

Note D - License Fees Expense - License Agreement

Effective April 30, 2001, the Company entered into a license agreement with
Direct Wireless Corporation. The Company had agreed to pay $10,000,000 under the
terms of the license agreement to be paid as the Company gains money from the
sale or sales of sub-licenses for the United States. The Company had also agreed
to pay a percentage of all fees collected of licensed products to Direct
Wireless under the terms of the agreement.

As a result of the Barnhill Group Acquisition, the license agreement was
canceled.

The accompanying financial statements include $15,900 of license fees expensed
that have been paid to Direct Wireless for the year ended December 31, 2003 and
$240,440 from inception. No amortization of such fees have occurred during the
development stage.

Note E - Escrow Agreement

The Company has established an irrevocable escrow agreement with a brokerage
firm. The funds received from the sale of escrow shares were recorded as
additional capital in the accompanying financial statements. As of December 31,
2003, the escrow agent does not have any shares remaining in the escrow fund.

Note F - Federal Income Taxes

At December 31, 2003, the Company had net operating loss carryforwards totaling
$1,108,478, which expire in 2023. Realization of deferred assets resulting from
the NOL carryforwards have been offset by a valuation allowance.

                                       F-9

<PAGE>

HEALTH DISCOVERY CORPORATION                                              Page 9
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(a Development Stage Company)
Notes to Financial Statements
December 31, 2003

Note F - Federal Income Taxes (Continued)

Deferred taxes are classified as current or non-current, depending on the
classification of the assets and liabilities to which they relate. Deferred
taxes arising from timing differences that are not related to an asset or
liability are classified as current or non-current depending on the periods in
which the timing differences are expected to reverse. The Company's previous
principal temporary differences relate to revenue and expenses accrued for
financial purposes, which are not taxable for financial reporting purposes.

The components of the provision for income tax (expense) benefits are as
follows:

                             Year Ended December 31,

                                           2003           2002
                                        ---------      ---------
      Deferred:
           Federal                      $  70,642      $ 109,463
           State                           14,148         31,922
           Valuation Allowance            (84,790)      (131,385)
                                        ---------      ---------
                                        $      -0-     $      -0-
                                        ---------      ---------

The above provision has been calculated based on Federal and State statutory
rates in the adjusted rates of 34% for Federal and 4.5% for State tax rates.

Temporary differences, which give rise to deferred tax assets and liabilities
are as follows:

                             Year Ended December 31,

                                            2003          2002
                                          ---------      ---------
Deferred tax assets:

         Net Operating Loss               $  84,790      $ 131,385
                                          ---------      ---------

Total deferred tax assets:                   84,790        131,385

Deferred tax liabilities:

         Net Income                              -0-            -0-
                                          ---------      ---------

Valuation Allowance                       $ (84,790)     $(131,385)
                                          ---------      ---------

Net deferred tax assets (liabilities)     $      -0-     $      -0-
                                          =========      =========

Net deferred tax assets and liabilities have been presented in the financial
statements as follows:

                             Year Ended December 31,

                                            2003          2002
                                          ---------      ---------
Deferred income taxes - current                  -0-            -0-

                                          ---------      ---------
Net deferred tax assets                   $      -0-     $      -0-
                                          =========      =========

                                      F-10
<PAGE>

HEALTH DISCOVERY CORPORATION                                             Page 10
(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(a Development Stage Company)
Notes to Financial Statements
December 31, 2003

Note G - Note Payable

As part of the purchase of Fractal Genomics, LLC's assets, Health Discovery
Corporation agreed to pay an additional $500,000 in eight equal installments of
$62,500 plus interest at the rate of six percent (6%) per annum with the initial
payment due and payable on January 2, 2004 and thereafter on the following
dates: April 1, 2004; July 1, 2004; October 1, 2004; January 1, 2005; April 1,
2005; July 1, 2005; and October 1, 2005. In the event that any payment of
principal and interest is not made within fifteen (15) days after the due date
thereof, then all of the then unpaid principal and relevant accrued interest
shall become immediately due and payable.

Following are maturities schedule of the note:

                 Year Ended December
                         31,                     Amount
                -----------------------     -----------------
                         2004           $            246,279
                         2005                        253,721
                                            -----------------
                                        $            500,000
                                            =================

Note H - Outstanding Warrants

At December 31, 2003, Health Discovery Corporation had outstanding stock options
to purchase 1,200,000 shares of its common stock. The warrants are exercisable
at a price of $0.01 per share which was the approximate low bid price at the
time of issuance. Additionally, the Company has issued options to purchase
4,300,000 shares of common stock. The options vest 800,000 as of each November
1, 2004, 2005 and 2006. The remaining options vest based on each option holder's
success in raising equity capital.

<TABLE>
<CAPTION>
                                                     December 31, 2003                   December 31, 2002
                                                -----------------------------      -------------------------------
                                                                  Weighted                            Weighted
                                                                   Average                             Average
                                                                  Exercise                            Exercise
                                                  Shares            Price            Shares             Price
                                                ------------     ------------      ------------     --------------

<S>                                                 <C>       <C>    <C>                <C>     <C>
Outstanding at Beginning of Year                     -       $        -                 -       $         -

==================================================================================================================

Granted                                          5,500,000                              -                 -
Exercised                                            -                -                 -                 -

Forfeited                                            -                -                 -                 -

Cancelled                                            -               .01

------------------------------------------------------------------------------------------------------------------
Outstanding at End of Year                       5,500,000          $.01

------------------------------------------------------------------------------------------------------------------
Options Exercisable (Vested) at Year End         1,200,000          $.01
</TABLE>

                                      F-11

<PAGE>

HEALTH DISCOVERY CORPORATION                                             Page 11

(FORMERLY KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)
(a Development Stage Company)
Notes to Financial Statements
December 31, 2003

NOTE I - EARNINGS PER SHARE

The following reconciles the components of the earnings per share (EPS)
computation:

                         (Loss)              Shares          Per Share
                     -------------------------------------------------
                       (Numerator)       (Denominator)      Amount

               2003    $  (229,595)        33,776,646       $(0.01)

               2002    $  (355,768)        24,427,041       $(0.01)

     Inception from    $(1,108,478)        19,809,111       $(0.06)
   April 6, 2001 to
      Dec 31,  2003

Options to purchase 1,200,000 shares were outstanding at December 31, 2003 were
not included in the computation of diluted EPS as they would be anti-dilutive.

NOTE J - GOING CONCERN

The accompanying financial statements have been prepared in conformity with
principles of accounting applicable to a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course of
business. No operating revenue has been derived since inception and has not yet
generated sufficient working capital to support its operations. The Company's
ability to continue as a going concern is dependent, among other things, on its
ability to reduce certain costs, obtain new contracts and additional financing
and eventually, attaining a profitable level of operations.

The Company plans to increase cash flows and take steps towards achieving
profitable operations through its business plan.

NOTE K - SUBSEQUENT EVENTS

The Company offered sale of restricted stock units to qualified investors
through a Private Placement Offering. The restricted stock units consist of one
share of restricted common stock and a warrant to acquire one share of
restricted common stock for $.35. The price of the restricted stock units is
$.10 per share. The stock sale commenced on February 1, 2004 and closed on July
31, 2004. Once the Private Placement Offering was completed, the resultant sale
to qualified individual investors in the amount of $1,521,000.00 units, which is
comprised of restricted common stock and warrants to acquire restricted common
stock. Under the terms of the sale, the company issued 15,210,000 restricted
common shares which represents approximately 19% of the total shares
outstanding. 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 $0.35
per share until February 2007. This could result in the issuance of up to
15,210,000 additional restricted common shares upon exercise. Neither the shares
sold pursuant to the private placement nor the shares issuable upon the exercise
of the warrants will be registered under either federal or state securities laws
and must be held for at least one year from the time they are issued.

On July 30, 2004, Health Discovery Corporation acquired the patents and patents
pending applications for certain machine learning tools used for diagnostic and
drug discovery. The rights in these assets were purchased from unrelated third
parties for a combination of cash consideration to be paid over time and
interest bearing notes payable that are convertible to common stock. An initial
cash payment of $175,394 will be paid by December 31, 2004. Four additional
payments of $175,394 will be made 4 months from the date of the initial payment
and every 4th month thereafter until $876, 968 has been paid. The Company has
imputed interest on the cash payments using a rate of 3.16 % resulting in a
liability that amounts to $858,733. The remainder of the consideration was paid
by issuing notes payable that bear interest at 3.16 % and are convertible into
6,634,221 shares of common stock (at $.17 per share) until maturity on July 28,
2009. The purchase was recorded as other assets in the accompanying financial
statements. The agreements place certain limitations on the selling the common
stock shares during certain periods after conversion.

                                      F-12

<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Waco,
State of Texas on September30, 2003.

Health Discovery Corporation

By: /s/Stephen D. Barnhill M.D., Chief Executive Officer
    ----------------------------------------------------
(Signatures and Title)

Stephen D. Barnhill M.D., Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:

Signature                                                           Date

S/Stephen D. Barnhill M.D.                                      January 5, 2005
-----------------------------------------------------

Stephen D. Barnhill M.D., Principal Executive Officer

S/David Cooper                                                  January 5, 2005
-----------------------------------------------------

David Cooper, President and Medical director

S/Robert S. Braswell IV                                         January 5, 2005
-----------------------------------------------------

Robert S. Braswell IV, Principal Financial Officer

S/Robert S. Braswell, IV                                        January 5, 2005
-----------------------------------------------------

Robert S. Braswell, IV, Principal Accounting Officer

S/Stephen D. Barnhill M.D.                                      January 5, 2005
-----------------------------------------------------

Stephen D. Barnhill M.D., Chairman of the Board

S/Stephen D. Barnhill M.D.                                      January 5, 2005
-----------------------------------------------------

Stephen D. Barnhill M.D., Director

S/Robert S. Braswell, IV                                        January 5, 2005
------------------------------------------------------

Robert S. Braswell, IV, Director

S/David Cooper                                                  January 5, 2005
-----------------------------------------------------

David Cooper, Director

                                      S-1

<PAGE>

Clyde Bailey, P.C.
10924 Vance Jackson # 404
San Antonio, Texas 78230

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

I consent to the inclusion, in the Annual Report of Health Discovery Corporation
(formerly known as Direct Wireless Communications, Inc.) on Form 10KSB/A, of our
report dated February 27, 2004, and January 5, 2005, relating to the financial
statements of Health Discovery Corporation (formerly known as Direct Wireless
Communications, Inc.) for the period ended December 31, 2003.

                                                              Clyde Bailey, P.C.

San Antonio, Texas
February 27, 2004 and January 5, 2004