**UNITED
      STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
      20549**




**FORM
      10-QSB**




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


For
      the quarterly period ended March 31, 2007





o
      Transition report under
      Section 13 or 15(d) of the Exchange Act


For
      the
      transaction period from _________ to _________





Commission
      file number 333-62216





**HEALTH
                DISCOVERY CORPORATION**(Exact
                name of small business issuer as specified in its
                charter)





Texas
            
            74-3002154(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification No.)5501
                1⁄2 Abercorn StreetSavannah, Georgia
            
            31405(Address
                of principal executive offices)
            
            (Zip
                Code)





912-352-7488(Issuer’s
                telephone number, including area code)(Former
                name, former address and former fiscal year,
              if
                changed since the last report)




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




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
o
      No x




**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE
      YEARS**




Check
      whether the registrant filed all documents and reports required to be filed
      by
      Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities
      under a plan confirmed by a court. Yes o No o




**APPLICABLE
      ONLY TO CORPORATE ISSUERS**




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: 116,493,384
      shares of common stock, no par value, were issued and outstanding as of May
      11,
      2007.




Transitional
      Small Business Disclosure Format (Check one): Yes o No x












**TABLE
      OF CONTENTS**





PART
                I
            FINANCIAL
                INFORMATION
            PageItem
                1.
            Financial
                StatementsBalance
                Sheet
            1Statements
                of Operations
            2Statements
                of Cash Flows
            3Notes
                to Financial Statements
            4Item
                2.
            Management’s
                Discussion andAnalysis
                Of Financial Condition and Results of Operation
            8Item
                3.
            Controls
                and Procedures
            11PART
                II
            OTHER
                INFORMATIONItem
                1.
            Legal
                Proceedings
            12Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            12Item
                6.
            Exhibits
            13Signatures
            14







**HEALTH
      DISCOVERY CORPORATION**





**Balance
      Sheet**


(unaudited)


Assets
 
 March
                  31,2007Current
                  AssetsCash
              
              $
              377,324Prepaid
                  Expenses and Other Assets
              
              
              60,823Total
                  Current Assets
              
              
              438,147Equipment,
                  Less Accumulated Depreciation of $16,760
              
              
              12,538Other
                  AssetsPatents,
                  Less Accumulated Amortization of $745,934
              
              
              3,239,860Investments
              
              
              5,000Total
                  Assets
              
              $
              3,695,545Liabilities
                  and Stockholders’ EquityCurrent
                  LiabilitiesAccounts
                  Payable - Trade
              
              $
              180,302Accrued
                  Liabilities
              
              
              196,056Deferred
                  Revenue
              
              
              90,278Total
                  Current Liabilities
              
              
              466,636Accrued
                  Interest Payable
              
              
              173,120Long-Term
                  Debt
              
              
              321,911Convertible
                  Notes Payable
              
              
              665,643Notes
                  Payable, Net of Unamortized Discount of $392,417
              
              
              607,583Total
                  Liabilities
              
              
              2,234,893CommitmentsStockholders’
                  EquityCommon
                  Stock, No Par Value, 200,000,000 Shares Authorized116,493,384Shares Issued and Outstanding
              
              
              11,185,911Accumulated
                  Deficit
              
              
              (9,725,259
              )Total
                  Stockholders' Equity
              
              
              1,460,652Total
                  Liabilities and Stockholders' Equity
              
              $
              3,695,545






See
      accompanying notes to financial statements.


1




**HEALTH
      DISCOVERY CORPORATION**




**Statements
      of Operations**


(unaudited)


For
      the
      Three Months Ended March 31, 2007 and 2006


Three
              
              ThreeMonths
              
              MonthsEnded
              
              EndedMarch
                  31,
              
              March
                  31,2007
              
              2006Revenues:Licensing
              
              $
              10,833
              
              $
              105,000Total
                  Revenues
              
              
              10,833
              
              
              105,000Cost
                  of Sales:Internal
                  Development
              
              
              7,500
              
              
              -Total
                  Cost of Sales
              
              
              7,500
              
              
              -Gross
                  Profit
              
              
              3,333
              
              
              105,000Operating
                  Expenses:Amortization
              
              
              65,680
              
              
              65,680Professional
                  and Consulting Fees
              
              
              170,232
              
              
              573,229Compensation
              
              
              164,155
              
              
              359,298Other
                  General and Administrative Expenses
              
              
              131,904
              
              
              240,211Total
                  Operating Expenses
              
              
              531,971
              
              
              1,238,418Loss
                  From Operations
              
              
              (538,638
              )
              
              (1,133,418
              )Other
                  Income (Expense)Interest
                  Income
              
              
              6,987
              
              
              4,830Gains
                  on Restructuring of Accounts Payable
              
              
              44,594
              
              
              77,546Interest
                  Expense
              
              
              (102,044
              )
              
              (19,745
              )Total
                  Other Income (Expense)
              
              
              (50,463
              )
              
              62,631Net
                  Loss
              
              $
              (579,101
              )
              $
              (1,070,787
              )Weighted
                  Average Outstanding Shares
              
              
              116,468,384
              
              
              115,063,384Loss
                  Per Share
              
              $
              (.00
              )
              $
              (.01
              )


See
      accompanying notes to financial statements.


2




**HEALTHDISCOVERY
      CORPORATION**





**Statements
      of Cash Flows**


(unaudited)


For
        the
        Three Months Ended March 31, 2007 and 2006
 Three
                    Months
                
                Three
                    MonthsEnded
                
                EndedMarch
                    31,
                  2007
                
                March
                    31,
                  2006Cash
                    Flows From Operating Activities:Net
                    Loss
                
                $
                (579,101
                )
                
                (1,070,787
                )Adjustments
                    to Reconcile Net Loss to Net CashUsed
                    by Operating Activities:Noncash
                    Compensation
                
                
                38,606
                
                
                190,322Services
                    Exchanged for Warrants
                
                
                52,875
                
                
                305,265Accretion
                    of Debt Discount
                
                
                69,250
                
                
                -Issuance
                    of Warrants
                
                
                33,756
                
                
                -Decrease
                    in Accounts Receivable
                
                
                20,000
                
                
                -Decrease
                    in Deferred Revenue
                
                
                (10,833
                )
                
                -Gains
                    on Restructuring of Accounts Payable
                
                
                (44,594
                )
                
                (77,546
                )Depreciation
                    and Amortization
                
                
                68,183
                
                
                67,427Increase
                    in Prepaid Expenses and Other Assets
                
                
                (5,636
                )
                
                (15,023
                )(Decrease)
                    or Increase in Accounts Payable - Trade
                
                
                (13,032
                )
                
                222,406Increase
                    in Accrued Liabilities
                
                
                77,782
                
                
                76,181Net
                    Cash Used by Operating Activities
                
                
                (292,744
                )
                
                (301,755
                )Cash
                    Flows From Investing Activities:Purchase
                    of Equipment
                
                
                (298
                )
                
                (502
                )Acquisition
                    of Investee
                
                
                (5,000
                )
                
                -Net
                    Cash Used by Investing Activities
                
                
                (5,298
                )
                
                (502
                )Cash
                    Flows From Financing Activities:Proceeds
                    from Sales of Common Stock
                  Proceeds
                    from the Exercise of Options
                
                
                1,000
                  -
                
                
                100,000
                  6,000Net
                    Cash Provided by Financing Activities
                
                
                1,000
                
                
                106,000Net
                    Decrease in Cash
                
                
                (297,042
                )
                
                (196,257
                )Cash,
                    at Beginning of Period
                
                
                674,366
                
                
                719,167Cash,
                    at End of Period
                
                $
                377,324
                
                
                522,910Non-Cash
                    Investing and Financing Transactions:Warrants
                    Issued in Restructuring of Accounts Payable
                
                $
                -
                
                
                55,454Supplemental
                    disclosures of cash flow information:Cash
                    Paid for Interest
                
                $
                549
                
                
                -




See
      accompanying notes to financial statements.


3




**HEALTH
      DISCOVERY CORPORATION**





**Notes
      to Financial Statements**




**Note
        A - BASIS OF PRESENTATION**
 
 Health
        Discovery Corporation (the “Company”) is a biotechnology-oriented company that
        has acquired certain patents and has patent pending applications for certain
        machine learning tools used for diagnostic and drug discovery. The Company
        licenses the use of its patented protected technology and utilizes such
        technology internally to develop diagnostic tests, drug monitoring tests
        and
        drug targets for therapeutic use, and sells or licenses such discoveries
        to
        diagnostic or pharmaceutical companies worldwide.
 
 The
        accounting principles followed by the Company and the methods of applying
        these
        principles conform with accounting principles generally accepted in the United
        States of America (GAAP). In preparing financial statements in conformity
        with
        GAAP, management is required to make estimates and assumptions that affect
        the
        reported amounts in the financial statements. Actual results could differ
        significantly from those estimates.
 
 The
        interim financial statements included in this report are unaudited but reflect
        all adjustments which, in the opinion of management, are necessary for a
        fair
        presentation of the financial position and results of operations for the
        interim
        periods presented. All such adjustments are of a normal recurring nature.
        The
        results of operations for the period ended March 31, 2007 are not necessarily
        indicative of the results of a full year’s operations and should be read in
        conjunction with the financial statements and footnotes included in the
        Company’s annual report on Form 10-KSB for the year ended December 31,
        2006.
 
 ***Recent
        Accounting Pronouncements***
 
 In
        June
        2006, the Financial Accounting Standards Board (“FASB”) issued FASB
        Interpretation No. 48, *Accounting
        for Uncertainty in Income Taxes - An Interpretation of FASB Statement No.
        109* ,
        (“FIN
        48”). FIN 48 clarifies the accounting for uncertainty in income taxes by
        prescribing a recognition threshold and measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return. This pronouncement is effective for fiscal years
        beginning after December 15, 2006. We have adopted FIN 48 effective January
        1,
        2007. This adoption has not had a material impact on our financial
        statements.
 
 In
        September 2006, the FASB issued Statement No. 157, *Fair
        Value Measurements* ,
        (“Statement No. 157”). This statement provides a single definition of fair
        value, a framework for measuring fair value, and expanded disclosures concerning
        fair value. Previously, different definitions of fair value were contained
        in
        various accounting pronouncements creating inconsistencies in measurement
        and
        disclosures. Statement No. 157 applies under those previously issued
        pronouncements that prescribe fair value as a relevant measure of value,
        except
        Statement No. 123(R) and related interpretations and pronouncements that
        require
        or permit measurement similar to fair value but are not intended to measure
        fair
        value. This pronouncement is effective for fiscal years beginning after November
        15, 2007. We do not expect the adoption of Statement No. 157 to have a material
        impact on our financial position, results of operations, or cash
        flows.
  **Note
        B - REVENUE RECOGNITION**
 
 Revenue
        is generated through the sale or license of patented technology and processes
        and from services provided through development agreements. These arrangements
        are controlled by contracts that dictate responsibilities and payment terms.
        The
        Company recognizes revenues as they are earned over the duration of a license
        agreement or upon the sale of any owned patent once all contractual obligations
        have been fulfilled. Revenue is earned under development agreements in the
        period the services are performed. Deferred revenue represents the unearned
        portion of payments received in advance for licensing agreements. The Company
        had unearned revenue of $90,278 as of March 31, 2007.
 
 **Note
        C - NET LOSS PER SHARE**
 
 Basic
        Earnings Per Share (“EPS”) includes no dilution and is computed by dividing
        income or loss available to common shareholders by the weighted average number
        of common shares outstanding for the period. Diluted EPS reflects the potential
        dilution of securities that could share in the earnings or losses of the
        entity.
        Due to the net loss in all periods presented, the calculation of diluted
        per
        share amounts would create an anti-dilutive result and therefore is not
        presented.
 
 4
  **HEALTH
        DISCOVERY CORPORATION**
 
 **Notes
        to Financial Statements, continued**
 
 **Note
        D -** **STOCK-BASED
        COMPENSATION**
  Stock-based
        expense included in our net loss for the three months ended March 31, 2007
        consisted of $116,736 in compensatory warrants and options for professional
        consulting services, compensation, and interest. Stock-based expense included
        in
        our net loss for the three months ended March 31, 2006 consisted of $495,587
        for
        the issuance of options and warrants.
 
 As
        of
        March 31, 2007, there was approximately $398,562 of unrecognized cost related
        to
        stock option and warrant grants. The cost is to be recognized over the remaining
        vesting periods that average approximately 3 years. No options were granted
        during the first quarter of 2007.
 
 The
        Company granted 2,000,000 options during the first quarter of 2006. The fair
        value of each option granted in 2006 was $0.11 and was estimated on the date
        of
        grant using the Black-Scholes pricing model with the following assumptions:
        dividend yield at 0%, risk-free interest rate of 5.00%, an expected life
        of 10
        years, and volatility of 133%. Expected option lives and volatilities used
        in
        the fair valuation calculations are based on historical data of the Company
        and
        the related expense is recognized on a straight-line basis over the vesting
        period.
 
 The
        following schedule summarizes stock option activity for the three months
        ended
        March 31, 2007 and the twelve months ended December 31, 2006:
 
 Option
              
              Weighted
                AverageShares
              
              Exercise
                  PriceOutstanding,
                  January 1, 2006
              
              
              2,500,000
              
              $
              0.08Granted
              
              
              2,000,000
              
              
              0.11Exercised
              
              
              (600,000
              )
              
              0.01Forfeited
              
              
              (400,000
              )
              
              0.10Outstanding,
                  December 31, 2006
              
              
              3,500,000
              
              $
              0.11Granted
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Forfeited
              
              
              -
              
              
              -Outstanding,
                  March 31, 2007
              
              
              3,500,000
              
              $
              0.11
 
 The
        weighted average remaining life of the outstanding options at March 31, 2007
        is
        8.75 years.
 
 There
        were 2,250,000 options exercisable at March 31, 2007. The exercisable options
        have a weighted average exercise price of $0.11 and a weighted average remaining
        life of 8.75 years.
 
 
 
 5
  **HEALTH
        DISCOVERY CORPORATION**
 
 **Notes
        to Financial Statements, continued**
 
 **Note
        D -** **STOCK-BASED
        COMPENSATION, continued**
 
 Information
        about warrants outstanding at March 31, 2007 is summarized below:
 
 **Exercise
                  Prices**
              
              **Number**
                **Outstanding**
              
              **Weighted-**
                **Average**
                **Remaining**
                **Contractual**
                **Life
                  (years)**
              
              **Number**
                **Exercisable**
              
              **Weighted
                  Average Remaining Contractual Life (years) of**
                **Exercisable**
                **Warrants**$0.01
              
              
              800,000
              
              
              1
              
              
              800,000
              
              
              1$0.10
              
              
              1,365,000
              
              
              2
              
              
              1,265,000
              
              
              2$0.11
              
              
              1,000,000
              
              
              2
              
              
              1,000,000
              
              
              2$0.12
              
              
              150,000
              
              
              2
              
              
              150,000
              
              
              2$0.13
              
              
              5,500,000
              
              
              3
              
              
              3,500,000
              
              
              2$0.15
              
              
              1,000,000
              
              
              2
              
              
              1,000,000
              
              
              2$0.16
              
              
              10,000,000
              
              
              2.5
              
              
              7,000,000
              
              
              2.5$0.20
              
              
              500,000
              
              
              1
              
              
              500,000
              
              
              1$0.22
              
              
              500,000
              
              
              1
              
              
              500,000
              
              
              1$0.24
              
              
              32,546,250
              
              
              1
              
              
              32,546,250
              
              
              1$0.35
              
              
              15,235,000
              
              
              .5
              
              
              15,235,000
              
              
              .5Total
              
              
              68,596,250
              
              
              
              
              
              63,496,250
   On
        February 1, 2007, Health Discovery Corporation (the “Company”) issued in the
        aggregate 15,235,000 warrants to purchase common stock of the Company (the
        “Warrants”) to certain institutional investors and individual accredited
        investors. The Warrants vest immediately and have an exercise price of $0.35
        per
        share. The Warrants expire on November 1, 2007. On February 1, 2007, an equal
        number of warrants issued to the same institutional and individual investors
        and
        with substantially similar terms expired. The aggregate value of these warrants
        is approximately $33,755 and they were recorded as expense on the issue
        date.
 
 During
        January 2006, the Company issued 3,400,000 warrants to consultants and other
        service providers with a weighted-average exercise price of $0.12 per share.
        A
        total of $290,000 was charged to expense for Compensatory Warrants. The warrants
        became exercisable upon issuance.
  The
        Company issued 3,000,000 warrants to two directors in January 2006 with an
        exercise price of $0.13 per share. The grant date fair value of these warrants
        was $355,500. The warrants vest at a rate of 500,000 warrants (250,000 warrants
        for each director) after satisfactory completion of each 6 months of service
        until 3 years of service has been completed. The expense is being recorded
        over
        the service period.
  In
        January 2006, the Company issued 1,000,000 warrants to a director with an
        exercise price of $0.15 per share in conjunction with a common stock sale.
        The
        Company has ascribed no value to the warrants associated with the common
        stock
        sale.
  **Note
        E - GAIN ON RESTRUCTURING OF ACCOUNTS PAYABLE**
  On
        March
        1, 2007, the Company recorded a gain on accounts payable restructuring of
        $44,594 pursuant to the agreement made in the third quarter of 2006 deferring
        some payments until certain conditions were met or eliminating the liability
        if
        these conditions did not occur.
  **Note
        F - PATENTS**
 
 The
        Company has acquired a group of patents related to biotechnology and certain
        machine learning tools used for diagnostic and drug discovery. Additionally,
        legal costs associated with patent acquisitions and the application process
        are
        also capitalized as a part of patents. The Company has recorded as other
        assets
        $3,239,860 in patents and patent related costs, net of $745,934 in accumulated
        amortization, at March 31, 2007.
 
 6
 
 **HEALTH
        DISCOVERY CORPORATION**
 
 **Notes
        to Financial Statements, continued**
 **Note
        F - PATENTS, continued**
 
 Amortization
        charged to operations for the three months ended March 31, 2007 and 2006
        was
        $65,780 in both years. The weighted average amortization period for patents
        is
        14 years. Estimated amortization expense for the next five years is $263,120
        per
        year.
 
 **Note
        G - INVESTMENTS**
 
 On
        March
        27, 2007, the Company formed SVM Capital LLC as an equity investment for
        purposes of utilizing SVMs as a quantitative investment management technique.
        The investment is presented using the equity method of accounting.
 
 **Note
        H - STOCKHOLDERS’ EQUITY**
 
 In
        January 2007, the Company issued 100,000 shares of stock for warrants exercised
        at $0.01 each. Proceeds of $1,000 were recorded in capital stock.
 
 During
        the first quarter of 2006, the Company issued 600,000 shares of its common
        stock
        upon the exercise of stock options. Proceeds from the exercise totaled
        $6,000.
 
 In
        addition, in the first quarter of 2006 the Company sold 1,000,000 shares
        of its
        common stock to one of its directors for $100,000. The shares were sold for
        $0.10 per share which was the closing price of the stock on the date of the
        sale. As part of the purchase, the director also received warrants to purchase
        an additional 1,000,000 shares of the Company’s common stock at a fixed price of
        $0.15 per share until December 2008. No portion of the proceeds was assigned
        to
        the value of the warrants because the exercise price of the warrants exceeded
        the market value of the underlying common stock on the date of
        purchase.
 
 **Note
        I - 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. Limited revenue has been derived since inception, and the Company
        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 control certain costs and obtain new contracts
        to
        eventually attain a profitable level of operations.
 
 The
        Company is licensing the technology underlying several of its patents and
        providing supporting services related to the application of such technology
        that
        is resulting in ongoing revenue. In addition, management has successfully
        negotiated agreements with its debt holders, which resulted in the deferral
        of
        cash payments on debt until October 2008. Management has instituted a cost
        reduction program whereby the salaries of company employees, including senior
        management, have been reduced or deferred. Based on these developments,
        management believes revenue generation will continue, additional licensing
        agreements will be obtained in the near-term, and non-revenue generating
        costs
        will be controlled.
  7
  **Item
        2.****Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations**
  **Corporate
        Overview**
  Our
        Company is a pattern recognition company that uses advanced mathematical
        techniques to analyze large amounts of data to uncover patterns that might
        otherwise be undetectable. Our Company operates primarily in the emerging
        field
        of molecular diagnostics where such tools are critical to scientific discovery.
        Our primary business consists of licensing our intellectual property and
        working
        with prospective customers on the development of varied products that utilize
        pattern recognition tools. We also endeavor to develop our own product line
        of
        newly discovered biomarkers and pathways that 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 derive relevant and accurate clinical
        data, producing accurate biomarker and pathway discoveries, resulting in
        patent
        protection of our biomarker discoveries for future development.
  Our
        business 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 process includes several critical
        levels
        of decision-making - all of which are part of our business strategy. We intend
        to produce more relevant and predictable biomarkers for drug discovery so
        that
        new and better medicines and diagnostic markers can be developed for patients
        worldwide. With the completion of the acquisition of the SVM portfolio of
        patents we have begun to license the use of this technology.
  **Three
        Months Ended March 31, 2007 Compared with Three Months Ended March 31,
        2006**
  **Revenue**
  For
        the
        three months ended March 31, 2007, revenue was $10,833 compared with $105,000
        for the three months ended March 31, 2006. Revenue is recognized for licensing
        and development fees over the period earned.
  **Cost
        of Sales and Gross Margin**
  Internal
        development costs of $7,500 were recorded as cost of sales for the first
        quarter
        2007. No such costs were recorded for the prior year. Cost of sales includes
        all
        direct costs, primarily wages and research fees, associated with the acquisition
        and development of patents and processes sold. All direct costs, primarily
        professional fees, associated with licensing negotiations, are also included
        in
        cost of sales.
  **Operating
        and Other Expenses**
  Amortization
        expense was $65,680 for both the first quarter of 2007 and the first quarter
        of
        2006. Amortization expense relates primarily to the costs associated with
        filing
        patent application and acquiring rights to the patents.
  Professional
        and consulting fees totaled $170,232 for the first quarter of 2007 compared
        with
        $573,229 for the first quarter of 2006. In the first quarter 2006, warrants
        valued at approximately $250,000 were granted. No similar grants were made
        during the first quarter of 2007. These fees, related to legal, accounting
        and
        scientific activities, were also lower in 2007 because of efforts to control
        costs related to regulatory filing activity, patent protection efforts, and
        general corporate legal and accounting work.
  Compensation
        of $164,155 for the first quarter of 2007 was lower than the $359,298 reported
        for the first quarter of 2006. The reduction in compensation is due primarily
        to
        options granted in 2006 totaling $190,322 included as compensation.
  Other
        general and administrative expenses decreased to $131,904 for the first quarter
        of 2007 compared to $240,211 for the first quarter of 2006. This decrease
        was
        largely due to ongoing cost containment efforts undertaken since
        mid-2006.
  8
  **Loss
        from Operations**
  The
        loss
        from operations for the first quarter of 2007 was $528,904 compared to
        $1,133,418 for the first quarter of 2006. This reduced loss was largely due
        to
        ongoing cost reduction efforts as previously discussed.
 
 **Other
        Income and Expense**
 
 Interest
        income was $6,987 for the first quarter of 2007 compared to $4,830 in 2006.
        Interest income increased because the Company had more cash on hand to invest
        throughout the first quarter of 2007.
  Interest
        expense was $102,044 in the first quarter of 2007 compared with $19,745 in
        the
        first quarter of 2006. This increase was due to the higher interest rate
        associated with the renegotiated promissory notes, interest due on the
        promissory note secured in September 2006, and accretion of $69,250 related
        to
        the discount recorded for the warrants issued along with the September 2006
        promissory note.
  **Net
        Loss**
  The
        net
        loss for the first quarter of 2007 was $579,101 compared to $1,070,787 for
        the
        first quarter of 2006. The reduced loss was due to the diminished loss from
        operations, unfavorably offset by the increased interest expense.
 
 Net
        loss
        per share was $0.00 for the first quarter of 2007 compared to $0.01 for the
        first quarter of 2006.
  **Liquidity
        and Capital Resources**
  At
        March
        31, 2007, the Company had $377,324 in available cash. Cash used by operating
        activities was $292,744. This was due primarily to the net loss of $579,101;
        however, net non-cash charges and adjustments of $286,357 favorably impacted
        the
        computation of the net cash used. Cash used by investment activities was
        $5,298
        due to the acquisition of assets and the investment made in SVM Capital LLC.
        Net
        cash provided by financing activities was $1,000 due to the cash received
        from
        sale of common stock resulting from the exercise of warrants.
  A
        portion
        of our cash will be used to satisfy the Company’s outstanding debt obligations
        related to the acquisition of the SVM assets and fees due to professionals
        for
        services performed.
  The
        following table summarizes the due dates of our contractual obligations.
        The
        Company has no long term lease agreements in effect as of March 31,
        2007.
  Total
              
              Less
                  than
                1
                  Year
              
              1-3
                YearsAccrued
                  Interest Payable
              
              $
              173,120
              
              $
              -
              
              $
              173,120Accounts
                  Payable Deferred
              
              
              126,272
              
              
              126,272
              
              
              -Deferred
                  Compensation
              
              
              45,000
              
              
              45,000
              
              
              -Term
                  Debt
              
              
              321,911
              
              
              -
              
              
              321,911Convertible
                  Notes Payable
              
              
              665,643
              
              
              -
              
              
              665,643Promissory
                  Note
              
              
              1,000,000
              
              
              -
              
              
              1,000,000Total
              
              $
              2,331,946
              
              $
              171,272
              
              $
              2,160,674
 
  The
        Company formed SVM Capital LLC as an equity investment in the first quarter
        of
        2007 for purposes of utilizing SVM pattern recognition as a quantitative
        investment management tool.
  The
        Company, in an effort to preserve cash, to enable the Company to continue
        its
        operations, and as a condition to a loan from a director, negotiated a
        restructuring of certain of its accounts payable with selected vendors,
        primarily its legal and professional vendors. In September 2006, two vendors
        reduced their outstanding balances by $37,190, or 50%, in settlement of the
        full
        liability for a cash payment of $37,190. This settlement was recorded as
        a gain
        on restructuring. Several other vendors agreed to extend the payment terms
        and
        defer collection on outstanding amounts for an indefinite period of time.
        The
        Company currently expects to pay such amounts in six to eight months upon
        increases in revenues and or additional equity or debt financing, although
        none
        of those events is certain. The total amount of accounts payable deferred
        in
        September 2006 was $170,966. The Company also issued 300,000 warrants to
        these
        vendors with an exercise price of $0.10 per share. The fair value of these
        warrants on the grant date was $16,872 and was recorded as an expense in
        connection with the restructuring. The amount was charged to expense in the
        quarter as the warrants vested immediately. The deferred payments to the
        vendors
        has not been discounted as the date of payment is not certain.
  9
 The
        Company has relied primarily on equity funding plus debt financing for
        liquidity. The Company produced sales, licensing, and developmental revenue
        in
        2005 and 2006 and must continue to do so in order to generate sufficient
        cash to
        continue operations. The Company’s plan to have sufficient cash to support
        operations is comprised of generating revenue through licensing its significant
        patent portfolio, providing services related to those patents, and obtaining
        additional equity or debt financing. The Company has been and continues to
        be in
        meaningful discussions with a variety of parties, which if successful, will
        result in significant revenue. The Company has implemented a cash conservation
        plan that includes salary deferrals and reductions, reduction in consulting
        payments, negotiated settlements with creditors whereby the Company substituted
        equity instruments for amounts owed, and a heightened scrutiny of all potential
        expenditures.
  **Operational
        Activities**
  We
        are in
        the final stages of negotiations with a large European pharmaceutical company
        to
        develop a companion diagnostic test using our discovered biomarkers as
        surrogates in the last phase of a clinical trial for its new drug to treat
        BPH
        (enlarged prostate). If the negotiation results in an agreement, we believe
        this
        will be the first attempt to incorporate a custom-made surrogate biomarker
        expression signature into a clinical trial for an existing drug. Working
        together with seven corporations and universities we have selected as our
        development partners, we believe that the Company can indeed build a successful
        test. If the BPH drug ultimately receives FDA approval, the test, which we
        expect to own, could also be used to monitor patients after commercial launch
        of
        the drug. Such an undertaking has other advantages, as well. The methodology
        we
        develop might be a model for an important component in the conduct of future
        clinical trials worldwide. The advantages of this novel approach could include
        reducing a trial’s duration and cost, providing more objective data, increasing
        patient safety by potentially reducing or eliminating placebos, and expediting
        the time to market for successful drugs. Almost as importantly, it may be
        able
        to provide information earlier in the trial process that a drug is *not* working,
        thus saving time, money and intellectual resources.
  We
        have
        entered into an agreement with a leading biotech company to develop an SVM-based
        diagnostic test to help interpret flow cell cytometry data for a particular
        medical condition. Our science team’s analysis of partial data provided to us
        demonstrates a successful proof of concept. If our partner accepts our
        conclusions, it opens a portal to similar work on diseases such as leukemia
        and
        lymphoma that are far more prevalent.
  We
        have
        just entered discussions with the same biotechnology company and another
        diagnostics firm to develop a breast cancer prognostic test similar to the
        Oncotype DX test from Genomic Health and the new FDA-approved *MammaPrint* test
        from Agendia, a European firm. If we can reach agreement with either party,
        we
        will lead the development of this project and own some or all of the final
        FDA-approved product.
  We
        have
        started discussions with a large international healthcare company we have
        long
        pursued. At stake is licensing and product development using SVMs in diagnostic
        radiology, including mammography, PET scans, CT scans, MRI and other
        radiological images. We own a number of SVM patents in this field that we
        think
        are very important.
  We
        are in
        early talks with three companies about our recently-discovered 4-gene prostate
        cancer biomarker signature, for which we have filed a patent application.
        Given
        the accuracy and disease-specific applicability of this biomarker, as well
        as
        the level of enthusiasm we discern at these firms, it is possible that
        discussions could progress at a much faster pace than we have experienced
        in the
        past.
  We
        have
        received serious inquiry from a European molecular diagnostics company about
        the
        applicability of our RFE-SVM pattern recognition technology to MicroRNA
        expression signature discovery and to circulating tumor cells to identify
        micro-metastasis in blood.
  Finally,
        we have been in continuing but still embryonic discussions with a few clinical
        labs to provide commercial outlets for biomarker-based clinical tests to
        be
        developed and wholly or partly owned by us. With one or more such partners,
        we
        may be able to market tests directly to physicians. The selection of any
        particular clinical lab partner may be incorporated into a specific license
        and
        product development deal.
  In
        addition to traditional license and development agreements, we are expanding
        our
        approach to monetizing our intellectual property. In the first quarter of
        2007,
        we formed an equity investment, SVM Capital, LLC, with Atlantic Alpha
        Strategies, LLC to apply our SVM pattern recognition tools to quantitative
        investment analysis. We believe that research efforts to date show promise
        in
        developing computer-based investment and hedging techniques. The specific
        goal
        is to substantially reduce investment risk while providing superior, but
        not
        necessarily outsized, returns for comparable asset classes. If SVM Capital
        can
        advance the predictive art sufficiently, the ultimate business objective
        is to
        create one or more funds that would appeal to conservative and risk-averse
        investors. We believe that there are many “quant funds” successfully using
        different mathematics-based techniques, including neural networks, to assist
        in
        the investment decision-making process by uncovering patterns that might
        otherwise be impossible or too time-consuming to discern. To the best of
        our
        knowledge, none use SVM-based models. In broad terms, if SVM Capital can
        replicate in this arena the consistent superiority SVMs have shown, for example,
        over neural networks in hundreds of medical field studies, it could achieve
        an
        advantaged and patent-protected position in quantitative-based investments
        in
        equities, debt instruments, currencies and commodities.
  10
  While
        we
        have a lot of negotiations in process, there is a possibility that none will
        be
        finalized or that those that may be finalized do not provide the economic
        returns that we expect. Accordingly, the Company has implemented a cash
        conservation plan that includes salary deferrals and reductions, reduction
        in
        consulting payments, negotiated settlements with creditors whereby the Company
        substituted equity instruments for amounts owed, and a heightened scrutiny
        of
        all potential expenditures. Should it prove necessary, the Company may also
        consider such alternatives as raising additional equity through private
        placements and/or debt offerings. Although this raises doubt with respect
        to our
        ability to operate as a going concern, the Company believes that it has
        sufficient capability to operate through the next twelve months.
  **Off-Balance
        Sheet Arrangements**
  The
        Company has no off-balance sheet arrangements that provide financing, liquidity,
        market or credit risk support or involve leasing, hedging or research and
        development services for our business or other similar arrangements that
        may
        expose us to liability that is not expressly reflected in the financial
        statements.
 
 **Forward-Looking
        Statements**
 
 This
        Report contains certain forward-looking statements within the meaning of
        Section
        27A of the Securities Act of 1933 and Section 12E of the Securities Exchange
        Act
        of 1934, including or related to our future results, certain projections
        and
        business trends. Assumptions relating to forward-looking statements involve
        judgments with respect to, among other things, future economic, competitive
        and
        market conditions and future business decisions, all of which are difficult
        or
        impossible to predict accurately and many of which are beyond our control.
        When
        used in this Report, the words “estimate,” “project,” “intend,” “believe,”
“expect” and similar expressions are intended to identify forward-looking
        statements. Although we believe that assumptions underlying the forward-looking
        statements are reasonable, any of the assumptions could prove inaccurate,
        and we
        may not realize the results contemplated by the forward-looking statement.
        Management decisions are subjective in many respects and susceptible to
        interpretations and periodic revisions based on actual experience and business
        developments, the impact of which may cause us to alter our business strategy
        or
        capital expenditure plans that may, in turn, affect our results of operations.
        In light of the significant uncertainties inherent in the forward-looking
        information included in this Report, you should not regard the inclusion
        of such
        information as our representation that we will achieve any strategy, objective
        or other plans. The forward-looking statements contained in this Report speak
        only as of the date of this Report as stated on the front cover, and we have
        no
        obligation to update publicly or revise any of these forward-looking statements.
        These and other statements, which are not historical facts are based largely
        on
        management’s current expectations and assumptions and are subject to a number of
        risks and uncertainties that could cause actual results to differ materially
        from those contemplated by such forward-looking statements. These risks and
        uncertainties include, among others, the risks and uncertainties described
        in
“Risk Factors” section to our Annual Report for the fiscal year ended December
        31, 2006, filed on March 31, 2007.
  **Item
        3. Controls and Procedures.**
 
 As
        of
        March 31, 2007 (the “Evaluation Date”), we carried out an evaluation, under the
        supervision and with the participation of our management, including our Chief
        Executive Officer and President and our Principal Financial Officer, of the
        effectiveness of the design and operation of our disclosure controls and
        procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934,
        as
        amended (the “Exchange Act”). Based upon this evaluation, our Chief Executive
        Officer and our Principal Financial Officer concluded that, as of the Evaluation
        Date, our disclosure controls and procedures were effective under Rule
        13a-15.
  Because
        of the inherent limitations in all control systems, no evaluation of controls
        can provide absolute assurance that the Company’s disclosure controls and
        procedures will detect or uncover every situation involving the failure of
        persons within the Company to disclose material information otherwise required
        to be set forth in the Company’s periodic reports.
  The
        Company’s management is also responsible for establishing and maintaining
        adequate internal control over financial reporting to provide reasonable
        assurance regarding the reliability of financial reporting and the preparation
        of financial statements for external purposes in accordance with generally
        accepted accounting principles. As of the Evaluation Date, no changes in
        the
        Company’s internal control over financial reporting occurred, that have
        materially affected, or are reasonably likely to materially affect, the
        Company’s internal control over financial reporting.
 
 11
 
 **PART
        II—OTHER INFORMATION**
 
 **Item
        1. Legal Proceedings.**
 
 On
        May
        25, 2004, we filed suit in the District Court of McLennan County, Texas,
        against
        Bill G. Williams, Shirley K. Williams, W. Steven Walker, Jerry W. Petermann
        and
        a company controlled by Mr. Williams. In this action we allege that an aggregate
        of 700,000 shares of our common stock (4,900,000 after a 7-1 stock split)
        issued
        to Mr. Williams, Mr. Walker, Mr. Braswell and Mr. Petermann were not issued
        in
        compliance with Texas law and we sought to restrain the defendants and persons
        acting on their behalf or in concert with them from selling any shares of
        our
        stock. We also requested that the Court declare we were permitted to cancel
        the
        shares issued to the defendants and award monetary damages, attorney’s fees and
        costs of the action.
  In
        June
        2004, Jerry W. Petermann agreed to return to the Company 1,000,000 shares
        of the
        Company stock, which were cancelled upon return to the Company. In addition,
        in
        June 2004, Robert S. Braswell IV agreed to return to the Company 2,100,000
        shares of the company stock, all of which were cancelled upon return to the
        Company. Cancellation of the returned stock certificates was considered full
        and
        final settlement of the claims brought against Mr. Petermann and Mr. Braswell
        in
        this lawsuit.
  In
        July
        2004, W. Steven Walker Esq., former general counsel, an officer and director
        of
        the Company, agreed to settle with the Company and return 366,036 shares
        of our
        common stock, which were all of the shares then owned by him, and he will
        no
        longer be a party to the suit. At this time, only the shares originally issued
        to Mr. Williams are subject to the suit, and the Company believes he controls
        approximately 1.6 million shares of our common stock.
  After
        several rulings at the District Court, on August 25, 2004 the Court of Appeals
        for the Tenth District of the State of Texas granted our appeal and entered
        an
        order, remanding the case to the original trial judge with instructions to
        issue
        a temporary injunction to preserve the status quo. The injunction will remain
        until a  judgment
        in the case becomes final or the court otherwise instructs. The injunction
        requires the remaining defendants, their agents, employees, affiliates, any
        person or entity they control, and any person acting in concert with them
        to (i)
        stop and refrain  from
        selling or otherwise disposing of any share of our common stock; and (ii)
        deposit into the registry of the District Court all shares of our common
        stock
        they now own or hold. Costs of the appeal were assessed against the Respondents.
        The defendants have asserted several counter claims against the Company,
        including a derivative action, and have brought third-party claims against
        several current officers of the Company.
  On
        June
        26, 2006, we originally filed suit in the United States District Court for
        the
        Eastern District of Texas against Ciphergen Biosystems, Inc. ("Ciphergen"),
        alleging claims for infringment of three patents related to support vector
        machine technology and seeking monetary and injunctive relief. Ciphergen
        denied
        infringement, challenged the validity of the patents, and alleged counterclaims
        against us. We deny liability to Ciphergen under the alleged counterclaims.
        Pursuant to a motion filed by Ciphergen, the litigation has been transferred
        to
        the United States District Court for the Northern District of California.
        The
        litigation is in its early stages, and no discovery has yet been
        taken.
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds.**
 
 During
        the first quarter of 2007, the Company issued 100,000 shares of stock for
        warrants exercised at $0.01 each. Proceeds of $1,000 were recorded in capital
        stock.
  12




**Item
      6.Exhibits.**




The
      following exhibits are attached hereto or incorporated by reference herein
      (numbered to correspond to Item 601(a) of Regulation S-B, as promulgated by
      the
      Securities and Exchange Commission) and are filed as part of this Form
      SB-2:




3.1
            
            Articles
                of Incorporation. Registrant incorporates by reference Exhibit 3.1
                to
                Registration Statement on Form SB-2, filed June 4, 2001.3.1(a)
            
            Articles
                of Amendment to Articles of Incorporation Registrant incorporates
                by
                reference Exhibit 2.2 to Form10-QSB, filed November 14, 2001.3.1(b)
            
            Articles
                of Amendment to Articles of Incorporation changing Registrant name
                from
                Direct Wireless Communications, Inc., to Health Discovery Corporation.
                Registrant incorporates by reference Exhibit 3.1 (b) to Form 10-KSB,
                filed
                March 3, 2004.3.2
            
            By-Laws.
                Registrant incorporates by reference Exhibit 3.2 to Registration
                Statement
                on Form SB-2, filed June 4, 2001.4.1
            
            Copy
                of Specimen Certificate for shares of common stock. Registrant
                incorporates by reference Exhibit 4.1 to Registration Statement on
                Form
                SB-2, filed June 4, 2001.4.1(b)
            
            Copy
                of Specimen Certificate for shares of common stock. Registrant
                incorporates by reference Exhibit 4.1 (b) to Form 10-KSB, filed March
                30,
                2004.4.2
            
            Excerpt
                from By-Laws. Registrant incorporates by reference Exhibit 4.2 to
                Registration Statement on Form SB-2, filed June 4, 2001.4.2(a)
            
            Corrected
                Article 3.02 of By-Laws. Registrant incorporates by reference Exhibit
                4.2(A) to Amendment No. 2 to Registration Statement on Form SB-2,
                filed
                August 15, 2001.10.1
            
            Employment
                Agreement with Stephen Barnhill. Registrant incorporates by reference
                Exhibit 10.3 to Form 10-KSB, filed April 19, 2005. *10.1(a)
            
            First
                Amendment to Employment Agreement with Stephen Barnhill. Registrant
                incorporates by reference Exhibit 99.2 to Form 8-K, filed January
                3,
                2006.10.1(b)
            
            Second
                Amendment to Employment Agreement with Stephen Barnhill. Registrant
                incorporates by reference Exhibit 99.3 to Form 8-K, filed September
                1,
                2006.10.2
            
            Form
                of Warrant. Registrant incorporates by reference Exhibit 10.7 to
                Form
                10-KSB, filed April 19, 2005.10.3
            
            Form
                of Warrant. Registrant incorporates by reference Exhibit 10.9 to
                Form
                10-KSB, filed April 19, 2005.10.4
            
            Employment
                Agreement with Daniel R. Furth, dated as of December 5, 2005. Registrant
                incorporates by reference Exhibit 10.11 to Form SB-2/A, filed December
                14,
                2005.10.5
            
            Employment
                Agreement with Robert S. Braswell IV, dated as of January 1, 2006.
                Registrant incorporates by reference Exhibit 99.1 to Form 8-K, filed
                February 2, 2006.10.6
            
            Form
                of Amendment to Promissory Note. Registrant incorporates by reference
                Exhibit 99.1 to Form 8-K, filed January 3, 2006.10.7
            
            Promissory
                Note by the Company in favor of William F. Quirk, Jr. Registrant
                incorporates by reference Exhibit 99.1 to Form 8-K, filed September
                5,
                2006.10.8
            
            Warrant
                by the Company in favor of William F. Quirk, Jr. Registrant incorporates
                by reference Exhibit 99.2 to Form 8-K, filed September 5,
                2006.10.9
            
            Form
                of Second Amendment to Promissory Note. Registrant incorporates by
                reference Exhibit 99.4 to Form 8-K, filed September 5,
                2006.31.1
            
            Rule
                13a-14(a)/15(d)-14(a) Certifications of Chief Executive
                Officer.31.2
            
            Rule
                13a-14(a)/15(d)-14(a) Certifications of Principal Financial
                Officer.32.1
            
            Section
                1350 Certification of Chief Executive Officer.32.2
            
            Section
                1350 Certification of Principal Financial
                Officer.




13




SIGNATURES





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




Health
              Discovery
              CorporationRegistrantDate:
              May 15,
              2007
            
            /s/ Stephen
              D. Barnhill M.D.Printed
              Name: Stephen D. Barnhill M.D.Title:
              Chief Executive Officer Date:
              May 15,
              2007
            
            /s/
              Daniel R.
              FurthPrinted
              Name: Daniel R. FurthTitle:
              Chief Financial Officer / Secretary








14