UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
  FORM
10-Q
  x
              Quarterly
      report under Section 13 or 15(d) of the Securities Exchange Act of
      1934
 For
      the quarterly period endedJune 30,
      2008
  o
              Transition
      report under Section 13 or 15(d) of the Exchange Act
 
 For
      the transaction period from _____________ to
  _____________Commission
      file number 333-62216
 
 HEALTH DISCOVERY
      CORPORATION
                (Exact
      name of small business issuer as specified in its
  charter)
 
 Georgia
              
              74-3002154(State
      or other jurisdiction of incorporation or organization)
              
              (IRS
      Employer Identification No.)
 
 2
      East Bryan Street, Suite #601
                Savannah, Georgia
      31401
                (Address
      of principal executive offices)912-443-1987
                (Issuer's
      telephone number, including area code)(Former
      name, former address and former fiscal year,
                if
      changed since the last report)
  Indicate
by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.  Yes o No x
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act.  (check one):
  Large
      Accelerated Filer  o
              Non-Accelerated
      Filer oAccelerated
      Filer  o
              Smaller
      Reporting Company x
  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 BANKRUPTCY
 PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
  Check
whether the registrant filed all documents and reports required to be filed by
Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court.  Yes o No o
  
  APPLICABLE
ONLY TO CORPORATE ISSUERS
  Indicate
the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 169,007,206 shares of common stock,
no par value, were issued and outstanding as of August 13, 2008; 7,437,184
shares of Series A Preferred Stock with a stated value of $0.08 per share were
issued and outstanding as of August 13, 2008.
   
  TABLE
OF CONTENTS
  PART I  -- FINANCIAL
      INFORMATION
              1Item
      1.
              Financial
      Statements
              1Balance
    Sheet
              1Statements of
      Operations
              2Statements of Cash
      Flows
              3Notes to Financial
      Statements
              4Item
      2.
              Management’s Discussion and
      Analysis of
      Financial Conditionand Results of
      Operations
              9Item
      4T.
              Controls and
      Procedures.
              14PART II -- OTHER
      INFORMATION
              16Item
      5.
              Other
      Information
              16Item
      6.
              Exhibits.
              16SIGNATURES
              17
  ii
 
 PART
I
 FINANCIAL
INFORMATION
 
 Item
1.  Financial Statements
 
 HEALTH
DISCOVERY CORPORATION
 Balance
Sheet
  AssetsJune
      30,
              
              
              December
      31,2008
                (unaudited)
              
              
              2007Current
      AssetsCash
              
              $
              818,493
              
              
              
              1,648,439Accounts
      Receivable
              
              
              112,500
              
              
              
              112,500Prepaid
      Expenses and Other Assets
              
              
              36,476
              
              
              
              33,829Total
      Current Assets
              
              
              967,469
              
              
              
              1,794,768Equipment,
      Less Accumulated Depreciation of $22,992 and $22,402
              
              
              5,123
              
              
              
              7,596Other
      AssetsAccounts
      Receivable – Long Term
              
              
              112,500
              
              
              
              112,500Patents,
      Less Accumulated Amortization of $1,074,334 and $942,974
              
              
              2,911,460
              
              
              
              3,042,820Total
      Assets
              
              $
              3,996,552
              
              
              
              4,957,684Liabilities and
      Stockholders’ EquityCurrent
      LiabilitiesAccounts
      Payable – Trade
              
              $
              11,948
              
              
              
              61,173Accrued
      Liabilities
              
              
              219,946
              
              
              
              239,589Deferred
      Revenue
              
              
              62,708
              
              
              
              62,708Total
      Current Liabilities
              
              
              294,602
              
              
              
              363,470Deferred
      Revenue – Long Term
              
              
              422,361
              
              
              
              453,715Total
      Liabilities
              
              
              716,963
              
              
              
              817,185CommitmentsStockholders’
      EquitySeries
      A Preferred Stock, Convertible, Stated Value of $0.08 per
      Share,7,437,184
      Shares Authorized, Issued and Outstanding
              
              
              594,975
              
              
              
              594,975Common
      Stock, No Par Value, 300,000,000 Shares Authorized169,007,206
      Shares Issued and Outstanding
              
              
              15,588,689
              
              
              
              15,390,609Accumulated
      Deficit
              
              
              (12,904,075
              )
              
              
              (11,845,085
              )Total
      Stockholders’ Equity
              
              
              3,279,589
              
              
              
              4,140,499Total
      Liabilities and Stockholders' Equity
              
              $
              3,996,552
              
              
              
              4,957,684
 
 See
accompanying notes to financial statements.
 1
  HEALTH
DISCOVERY CORPORATION
 
 Statements
of Operations
 (unaudited)
 
 Three
      Months
              
              
              Three
      Months
              
              
              Six
      Months
              
              
              Six
      MonthsEnded
              
              
              Ended
              
              
              Ended
              
              
              EndedJune
      30,
              
              
              June
      30,
              
              
              June
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Revenues:Licensing
              
              $
              15,677
              
              
              $
              10,834
              
              
              $
              31,354
              
              
              $
              21,667Cost
      of Revenues:Internal
      Development
              
              
              3,000
              
              
              
              3,900
              
              
              
              6,600
              
              
              
              11,400Gross
      Profit
              
              
              12,677
              
              
              
              6,934
              
              
              
              24,754
              
              
              
              10,267Operating
      Expenses:Amortization
              
              
              65,681
              
              
              
              65,680
              
              
              
              131,360
              
              
              
              131,360Professional
      and Consulting Fees
              
              
              171,149
              
              
              
              322,077
              
              
              
              324,999
              
              
              
              492,309Compensation
              
              
              196,654
              
              
              
              157,555
              
              
              
              393,840
              
              
              
              321,710Other
      General and Administrative Expenses
              
              
              93,044
              
              
              
              101,831
              
              
              
              262,587
              
              
              
              233,735Total
      Operating Expenses
              
              
              526,528
              
              
              
              647,143
              
              
              
              1,112,786
              
              
              
              1,179,114Loss
      From Operations
              
              
              (513,851
              )
              
              
              (640,209
              )
              
              
              (1,088,032
              )
              
              
              (1,168,847
              )Other
      Income (Expense)Interest
      Income
              
              
              11,782
              
              
              
              2,989
              
              
              
              29,524
              
              
              
              9,976Gains
      on Restructuring of Accounts Payable
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              44,594Interest
      Expense
              
              
              (170
              )
              
              
              (102,070
              )
              
              
              (482
              )
              
              
              (204,114
              )Total
      Other Income (Expense)
              
              
              11,612
              
              
              
              (99,081
              )
              
              
              29,042
              
              
              
              (149,544
              )Net
      Loss
              
              $
              (502,239
              )
              
              $
              (739,290
              )
              
              $
              (1,058,990
              )
              
              $
              (1,318,391
              )Weighted
      Average Outstanding Shares
              
              
              169,007,206
              
              
              
              116,493,384
              
              
              
              169,007,206
              
              
              
              116,479,098Loss
      Per Share
              
              $
              (.00
              )
              
              $
              (.01
              )
              
              $
              (.01
              )
              
              $
              (.01
              )
 
 See
accompanying notes to financial statements.
 2
  HEALTH
DISCOVERY CORPORATION
 Statements
of Cash Flows
 (unaudited)
 For the
Six Months Ended June 30, 2008 and 2007
  Six
      Months
              
              
              Six
      MonthsEnded
              
              
              EndedJune 30, 2008
              
              
              June 30, 2007Cash
      Flows From Operating ActivitiesNet
      Loss
              
              $
              (1,058,990
              )
              
              $
              (1,318,391
              )Adjustments
      to Reconcile Net Loss to Net CashUsed
      by Operating Activities:Stock-based
      Compensation
              
              
              46,338
              
              
              
              68,462Services
      Exchanged for Warrants
              
              
              151,741
              
              
              
              167,545Issuance
      of Warrants
              
              
              -
              
              
              
              33,756Accretion
      of Debt Discount
              
              
              -
              
              
              
              138,500Gains
      on Restructuring of Accounts Payable
              
              
              -
              
              
              
              (44,594
              )Depreciation
      and Amortization
              
              
              133,833
              
              
              
              135,918Increase
      in Interest Receivable
              
              
              (412
              )
              
              
              -Decrease
      in Accounts Receivable
              
              
              -
              
              
              
              20,000Decrease
      in Deferred Revenue
              
              
              (31,354
              )
              
              
              (21,667
              )Increase
      in Prepaid Expenses and Other Assets
              
              
              (2,234
              )
              
              
              (22,110
              )(Decrease)
      Increase in Accounts Payable – Trade
              
              
              (49,225
              )
              
              
              125,320
              )(Decrease)
      Increase in Accrued Liabilities
              
              
              (19,643
              )
              
              
              113,451Net
      Cash Used by Operating Activities
              
              
              (829,946
              )
              
              
              (603,810
              )Cash
      Flows From Investing Activities:Purchase
      of Equipment
              
              
              -
              
              
              
              (998
              )Investment
      in Joint Venture
              
              
              -
              
              
              
              (5,000
              )Net
      Cash Used by Investing Activities
              
              
              -
              
              
              
              (5,998
              )Cash
      Flows From Financing Activities:Proceeds
      from Sales of Common Stock, Net of Fees
              
              
              -
              
              
              
              1,000Net
      Cash Provided by Financing Activities
              
              
              -
              
              
              
              1,000Net
      Decrease in Cash
              
              
              (829,946
              )
              
              
              (608,808
              )Cash,
      at Beginning of Period
              
              
              1,648,439
              
              
              
              674,366Cash,
      at End of Period
              
              $
              818,493
              
              
              $
              65,558Supplemental
      disclosures of cash flow information:Cash
      Paid for Interest
              
              $
              482
              
              
              $
              1,125
 
 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 patent 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 June 30,
2008 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, 2007.
  Recent
Accounting Pronouncements
  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.  This pronouncement is
effective for fiscal years beginning after November 15, 2007.  Certain
provisions of SFAS No. 157 are effective for the Company beginning in the first
quarter of 2008.  The adoption of SFAS No. 157 for financial assets
and liabilities in the first quarter of 2008 did not have a material effect on
the Company’s results of operations and financial position.
  In
February 2007, FASB issued Statement of Financial Accounting Standards No. 159,
“Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS No. 159”), which
permits entities to choose to measure many financial instruments and certain
other items at fair value that were not currently required to be measured at
fair value.  The objective of SFAS No. 159 is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions.  SFAS No.
159 was effective for the Company beginning in the first quarter of
2008.  The adoption of SFAS No. 159 did not have a material impact in
the Company’s financial position.
  In
December 2007, FASB issued Statement of Financial Accounting Standards No. 141
(revised 2007), “Business
Combinations” (“SFAS No. 141(R)”), which continues the evolution toward
fair value reporting and significantly changes the accounting for acquisitions
that close beginning in 2009, both at the acquisition date and in subsequent
periods.  SFAS No. 141(R) is not expected to have a material impact on
the Company’s financial statements.
  4
  HEALTH
DISCOVERY CORPORATION
 
 Notes
to Financial Statements, continued
   Note A - BASIS OF
PRESENTATION, continued
  In
December 2007, FASB issued Statement of Financial Accounting Standards No. 160,
“Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS
No. 160”), which requires companies to measure an acquisition of noncontrolling
(minority) interest at fair value in the equity section of the acquiring
entity’s balance sheet.  The objective of SFAS No. 160 is to improve
the comparability and transparency of financial data as well as to help prevent
manipulation of earnings.  The changes introduced by the new standards
are likely to affect the planning and execution, as well as the accounting and
disclosure, of merger transactions.  The effective date to adopt SFAS
No. 160 for the Company is January 1, 2009.  The adoption of SFAS No.
160 is not expected to have a material effect on its results of operations and
financial position.
  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.
  Effective
July 1, 2007, the Company entered into a patent license and settlement agreement
with Ciphergen Biosystems, Inc. (“Ciphergen”) in connection with the pending
litigation styled Health
Discovery Corporation v. Ciphergen Biosystems, Inc. Case No. 07-00285-CRB
before the United States District Court for the Northern District of
California.  The agreement provides Ciphergen a license to use certain
patents.  In consideration for entering into the Agreement, Ciphergen
agreed to pay the Company $600,000 over a two-year period.  The
revenue associated with this settlement was recorded net of $130,000 in
contingently payable attorney fees as deferred revenue in the amount of $470,000
and will be recognized over the sixteen year remaining life of the subject
patents.  Deferred revenue represents the unearned portion of payments
received in advance for licensing agreements.  The Company had total
unearned revenue of $485,069 as of June 30, 2008.  Unearned revenue of
$62,708 is recorded as current and $422,361 is classified as
long-term.
  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.
  Note D -STOCK-BASED
EXPENSE
  Stock-based
expense included in our net loss for the three months and six months ended June
30, 2008 consisted of $69,122 and $198,079 respectively in compensatory warrants
and options for professional consulting services, directors fees and
compensation.  Stock-based expense included in our net loss for the
three months and six months ended June 30, 2007 was $145,527 and $269,753
respectively.
  As of
June 30, 2007 and June 30, 2008, there was approximately $356,918 and $214,840,
respectively, of unrecognized cost related to stock option and warrant
grants.  The cost is to be recognized over the remaining vesting
periods that average approximately 2.4 years.
  5
  HEALTH
DISCOVERY CORPORATION
  Notes
to Financial Statements, continued
   Note D -STOCK-BASED EXPENSE,
continued
  The
following schedule summarizes stock option activity for the six months ended
June 30, 2008 and the twelve months ended December 31, 2007:
  Option
                Shares
              
              
              Weighted
                Average
                Exercise PriceOutstanding,
      January 1, 2007
              
              
              3,500,000
              
              
              $
              0.11Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Forfeited
              
              
              -
              
              
              
              -Outstanding,
      December 31, 2007
              
              
              3,500,000
              
              
              $
              0.11Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Forfeited
              
              
              -
              
              
              
              -Outstanding,
      June 30, 2008
              
              
              3,500,000
              
              
              $
              0.11
 
 The
weighted average remaining life of the outstanding options at June 30, 2008 is
7.56 years.
  There
were 3,250,000 options exercisable at June 30, 2008.  The exercisable
options have a weighted average exercise price of $0.11 and a weighted average
remaining life of 7.56 years.  The aggregate intrinsic value of
options outstanding is zero at June 30, 2008.
  Information
about warrants outstanding at June 30, 2008 is summarized below:
  Six
      Months Ended
              
              
              Twelve
      MonthsEndedJune
      30
              
              
              December
      31Number
      of warrants issued
              
              2008
              
              
              2007Outstanding
      beginning of period
              
              
              159,099,644
              
              
              
              68,796,250Issued
              
              
              1,500,000
              
              
              
              122,773,394Exercised
              
              
              -
              
              
              
              (100,000
              )Expired
      un-exercised
              
              
              (300,000
              )
              
              
              (32,370,000
              )Outstanding
      end of the period
              
              
              160,299,644
              
              
              
              159,099,644
 
 6
  HEALTH
DISCOVERY CORPORATION
  Notes
to Financial Statements, continued
   Note D -STOCK-BASED EXPENSE,
continued
  Exercise Prices
              
              
              Number
                Outstanding
              
              
              Weighted-
                Average
                Remaining
                Contractual
                Life (years)
              
              
              Number
                Exercisable
              
              
              Weighted
                Average
                Remaining
                Contractual
      Life
                (years)
      of
                Exercisable
                Warrants$0.01
              
              
              
              200,000
              
              
              0.5
              
              
              
              200,000
              
              
              0.5$0.06
              
              
              
              1,500,000
              
              
              6.0
              
              
              
              0
              
              
              6.0$0.08
              
              
              
              1,800,000
              
              
              3.7
              
              
              
              800,000
              
              
              3.7$0.10
              
              
              
              1,425,750
              
              
              0.8
              
              
              
              1,425,750
              
              
              0.8$0.11
              
              
              
              1,500,000
              
              
              1.0
              
              
              
              1,500,000
              
              
              1.0$0.12
              
              
              
              150,000
              
              
              1.0
              
              
              
              150,000
              
              
              1.0$0.13
              
              
              
              5,500,000
              
              
              1.8
              
              
              
              5,125,000
              
              
              1.8$0.14
              
              
              
              52,138,822
              
              
              2.1
              
              
              
              52,138,822
              
              
              2.1$0.15
              
              
              
              1,000,000
              
              
              0.9
              
              
              
              1,000,000
              
              
              0.9$0.16
              
              
              
              10,000,000
              
              
              0.9
              
              
              
              10,000,000
              
              
              0.9$0.19
              
              
              
              51,538,822
              
              
              2.3
              
              
              
              51,538,822
              
              
              2.3$0.20
              
              
              
              500,000
              
              
              0.1
              
              
              
              500,000
              
              
              0.1$0.22
              
              
              
              500,000
              
              
              0.2
              
              
              
              500,000
              
              
              0.2$0.24
              
              
              
              32,546,250
              
              
              0.5
              
              
              
              32,546,250
              
              
              0.5Total
              
              
              
              160,299,644
              
              
              
              
              
              
              157,424,644
 
  In June
2008, a warrant to purchase 1,500,000 shares of Company common stock at an
exercise price of $0.06, vesting over three years and expiring in six years, was
issued by the Company to a new director.  The value of $74,136 will be
charged as directors’ fees over the vesting period.
  During
the first six months of  2008, 300,000 unexercised warrants
expired.
  In the
first quarter of 2008, the Company fully vested a 1,500,000 warrant grant for a
retiring director by accelerating the vesting of 375,000 warrants exercisable at
$0.13.  A charge of $44,438 was recorded as directors’
fees.
  On
February 1, 2007, 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 vested
immediately and had an exercise price of $0.35 per share.  The
Warrants expired 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 fair value of these
warrants was approximately $33,755 and they were recorded as expense on the
issue date.
  Also on
February 1, 2007, the Company issued 500,000 warrants to consultants, which
vested immediately, and have an exercise price of
$0.14.  Additionally, the Company issued 100,000 warrants to a
consultant, which vested over a period of ten months, and have an exercise price
of $0.14.  Together, these warrants were valued at $49,068 and expire
on December 31, 2009.  The expense was recorded over the vesting
period.
  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.
  7
  HEALTH
DISCOVERY CORPORATION
  Notes
to Financial Statements, continued
   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. Legal costs
associated with patent acquisitionsand the application
process for new patents are also capitalized as patent assets. The Company has
recorded as other assets $2,911,460 in patents and patent related costs, net of
$1,074,334 in accumulated amortization, at June 30, 2008.
  Amortization
charged to operations for the three months and six months ended June 30, 2008
and 2007 was approximately $65,680 and $131,360 for both years.  The
weighted average amortization period for patents is 14
years.  Estimated amortization expense for the next five years is
$262,720 per year.
  Note G –
INVESTMENTS
  On March
27, 2007, the Company and an investment partner formed SVM Capital LLC as an
equity investment for purposes of utilizing SVMs as a quantitative investment
management technique.  The Company owns 45% of the membership interest
and has significant influence with the operation of the entity but it not
considered the primary beneficiary.  Accordingly, the investment is
presented using the equity method of accounting.  The Company’s
initial investment was $5,000.  Equity in the loss of SVM Capital LLC
for 2007 was $5,000.  The resultant net value was zero at June 30,
2008.  The Company has no contractual obligation to fund this
venture.
  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.  No capital stock has been issued in 2008.
  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.  The Company raised $2.55 million in
cash through a common stock offering and additionally converted $2.2 million of
secured debt to equity in the third quarter of 2007.  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.
  Note J – SUBSEQUENT EVENTS
AND DEVELOPMENTS
  In July
2008, HDC entered into a Development and License Agreement with DCL Medical
Laboratories LLC, a full-service clinical reference laboratory focused on
women’s health, for the joint development of SVM-based computer assisted
diagnostic tests for the independent detection of ovarian, cervical and
endometrial cancers.  There was no initial investment by the
Company.  Future investment will be limited to certain administrative
costs.  Pursuant to the Development and License Agreement, HDC will
own any developed intellectual property and DCL Medical Laboratories LLC will
have a sole use license relating to applications and new mathematical tools
developed during the course of the Development and License
Agreement.
  On July
15, 2008, the Company received $112,500 due from Ciphergen Biosystems, Inc. in
accordance with a patent license and settlement agreement.
  8
 
 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 biomarker-based
diagnostic tests that include human genes and genetic variations, as well as
gene, protein, and metabolite expression differences and image
analysis.  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 and commercialization.
  We have
partnered and intend to continue partnering with clinical laboratories to
commercialize our clinical diagnostic tests and to provide pharmaceutical and
diagnostic companies with all aspects of all phases of 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.
  Operational
Activities
  The
Company actively markets its technology and related developmental expertise to
several prospects in the healthcare field, including some of the world’s largest
corporations in the pharmaceutical, biotech, and life sciences
industries.  Given the scope of some of these prospects, the sales
cycle can be quite long, but management believes that these marketing efforts
will produce favorable results.
  The U.S.
Patent and Trademark Office issued one new patent to the Company in April 2008,
which covers the use of FGM technology for visualization of data
patterns.  In May, 2008, the Company announced that the U.S. Patent
and Trademark Office issued two new patents to the Company.  One of
the patents claims a method for analysis of any type of data that has a
structure.  The second patent covers additional feature selection
techniques that can be used to successfully identify the most important pieces
of information needed to solve complex pattern-recognition
problems.  The U.S. Patent and Trademark Office issued one new patent
to the Company in June 2008, which covers the use of SVMs for computer-aided
analysis of medical images, with particular applications in cytology and
pathology.  Also in June 2008, the Company was issued a patent in
Japan, which covers recursive feature elimination (RFE) using SVMs for selection
and ranking of the most important features within large
datasets.  With the issuance of these patents, the Company now holds
the exclusive rights to 32 issued U.S. and foreign patents covering uses of SVM
and FGM technology for discovery of knowledge from large data sets.
  In May
2008 we entered into a letter of intent with DCL Medical Laboratories LLC, a
full-service clinical laboratory focused on women’s health, for the joint
development of an SVM-based computer assisted diagnostic test for the analysis
of cervical cells.  Through the application of the advanced technology
of pattern recognition, this new SVM-based system is intended to further improve
the sensitivity of the Pap test and augment the recent improvements of computer
guided screening that have already significantly improved detection
rates.  In addition, images and interpretative data from this new
SVM-based system may now be transmitted electronically, thus allowing remote
review and collaborative interpretation.  In July 2008, the Company
and DCL Medical Laboratories LLC entered into a Development and License
Agreement for the collaborative development and commercialization of SVM-based
computer assisted diagnostic tests for the independent detection of ovarian,
cervical and endometrial cancers, which expands the scope of the joint
development efforts.  Pursuant to the Development and License
Agreement, HDC will own any developed intellectual property and DCL Medical
Laboratories LLC will have a sole use license relating to applications and new
mathematical tools developed during the course of the Development and License
Agreement.  Dr. Hanbury, our new director, is currently President, CEO
and a shareholder of DCL  Medical Laboratories.
  9
  On July
31, 2007, we announced our alliance and licensing agreement with Clarient, Inc.
for development of a new molecular diagnostic test for prostate cancer based on
our discovered prostate cancer biomarker signature.  Under the terms
of that agreement, Clarient, Inc. obtained an exclusive license to the biomarker
signature in exchange for HDC’s 30% royalty interest from all reimbursements of
the test once commercialized.  We and Clarient have successfully
completed all phases of the clinical trial process with the hope of achieving
the statistical significance necessary to validate the ability to commercialize
a test.  Results from both the Phase I, Phase II and Phase
III double-blinded clinical validation studies now completed at Clarient
demonstrated a very high success rate for identifying the presence of
Grade 3 or higher prostate cancer cells (clinically significant cancer), as
well as normal BPH (benign prostatic hyperplasia) cells.  Combining
all of the patients from all three phases of the clinical trials, the new
geno-based molecular diagnostic test achieved a Sensitivity rate of 90% for
correctly identifying the presence of Grade 3 or higher prostate cancer
cells, a Specificity rate of 97% for correctly identifying normal prostate cells
and a Specificity rate of 90% for identifying BPH cells, representing an overall
test accuracy of 93%.  With the completion of the clinical trial,
HDC’s new gene-based molecular diagnostic test is now ready for
commercialization to be used by physicians on their patients at risk of having
prostate cancer. The new prostate cancer test will be performed at Clarient’s
Clinical Laboratory in Aliso Viejo, CA. HDC will receive 30% royalty on each
test performed.
  In
December 2007, we received our first royalty proceeds related to our licensing
agreement with Bruker Daltonics, which was originally announced in August,
2006.  The royalties relate to Bruker Daltonics’ sales of its
ClinProToolsTM
clinical proteomics product line for its mass spectrometers, which contains
HDC’s SVM technology.  Bruker launched its ClinProToolsTM at
approximately the same time as the license with HDC.  While the
initial royalty was relatively small, it represents HDC’s first royalty check
from this relationship and offers the opportunity of future royalties for the
life of the patents related to future sales of the Bruker product.
  Management
believes that our research 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 has resulted in a successful proof of
concept.  These findings were presented during the first quarter of
2008 and the due diligence process has accelerated to confirm our findings for
that particular condition and determine other applications within flow
cytometry.
  We have
advanced discussions with two large international healthcare companies with
respect to diagnostic imaging opportunities.  Our objective is
licensing and product development using SVMs and FGMs in diagnostic radiology,
including mammography, PET scans, CT scans, MRI and other radiological
images.  In addition, given the scope of these two prospects, we
believe we can demonstrate the computational power of our SVM technology
analyzing combined data from imaging, proteomics, and genomics.  We
own a number of SVM and FGM patents in this field that we believe are very
important.
  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) remain delayed
due to the prospect’s post-acquisition integration issues.  Based on
the prospect’s representations, we hope that discussions regarding this
prospective opportunity will resume sometime in 2008.  We have also
initiated discussions to bring this opportunity to other pharmaceutical
companies with new BPH drugs in clinical development.
  We have
advanced our dialogue with several other important industry players in the
healthcare field and, in certain situations, related to the field of pathology
imaging and genomic, including a proposed project with one of the world’s
largest diagnostic/pharmaceutical companies, a marketing arrangement with one of
the world’s largest generic drug manufacturers, and other prospective
partnership opportunities with additional companies and research
institutions.  We also continue to pursue development opportunities
with our existing licensing customers.
  We have
also advanced discussions with a company regarding the use of the SVM patents,
patent applications and all other technology that the Company has or has rights
to, which can be used for breast cancer diagnosis and treatment.  We
remain engaged in discussions related to this development effort with one of our
directors.  If we reach an agreement, we anticipate that research and
development will result in the creation and commercialization of tests that will
be used in the diagnosis and treatment of breast cancer.
  10
 In
January 2007, SVM Capital, LLC was formed as a joint venture between HDC and
Atlantic Alpha Strategies, LLC (“Atlantic Alpha”) to explore and exploit the
potential applicability of our SVM technology to quantitative investment
management techniques.  Atlantic Alpha has over thirty years of
experience in commodity and futures trading.  SVM Capital has made
significant progress since the formation of the joint venture.  The
SVM technology is now working well with dynamic time series for S&P data
accumulated over the past fifty-eight years.  The latest SVM-derived
models generated by SVM Capital have successfully outperformed the static buy-and-hold model both in
increased returns as well as in reduced risk.  Once the stability of
these models is confirmed, SVM Capital intends to apply the models to a wide
range of financial asset classes such as interest rates, currencies, metals and
petroleum products.  The joint venture partners plan to apply the
investment model either in a single fund or a fund of funds.  SVM
Capital will charge a management fee and a performance fee for managing client
assets.  Depending on the level of its success, this venture can be
profitable given its reliance on cost effective use of computer technology and
ready access to efficient trading platforms.  The initial investment
was $5,000 and was subsequently written off as the Company recorded its share of
the losses of this venture.  The Company has no further funding
commitment for this venture.
  Since
December 2005, the total value of licenses and development contracts signed is
approximately $1,362,500.
  While we
have a number of negotiations in process, there is a possibility that we will be
unable to reach agreement with any party, that the negotiations continue but are
not finalized, or that those that may be finalized do not provide the economic
return that we expect.
  Three
Months Ended June 30, 2008 Compared with Three Months Ended June 30,
2007
  Revenue
  For the
three months ended June 30, 2008, revenue was $15,677 compared with $10,834 for
the three months ended June 30, 2007.  Revenue is recognized for
licensing and development fees over the period earned.  This revenue
is primarily related to the amortization of deferred revenue resulting from
prior licensing agreements.
  Cost
of Revenues and Gross Margin
  Internal
development costs of $3,000 were recorded as cost of sales for the second
quarter 2008 compared with $3,900 for the second quarter of
2007.  Cost of revenues includes all direct costs, primarily wages and
research fees, associated with the acquisition and development of patents and
processes sold.  All direct costs, including some professional fees
associated with licensing negotiations, are also included in cost of
revenues.
  Operating
and Other Expenses
  Amortization
expense was $65,681 and $65,680 for the second quarter of 2008 and 2007,
respectively.  Amortization expense relates primarily to the costs
associated with filing patent application and acquiring rights to the
patents.
  Professional
and consulting fees totaled $171,149 for the second quarter of 2008 compared
with $322,077 for the second quarter of 2007.  The decrease is due to
an unusually high legal fees amount last year and warrants issued to consultants
in 2007.
  Compensation
of $196,654 for the second quarter of 2008 was higher than the $157,555 reported
for the second quarter of 2007.  Compensation increased because of the
restoration of salary decreases and medical insurance increases.
  Other
general and administrative expenses decreased to $93,044 for the second quarter
of 2008 compared to $101,831 for the second quarter of 2007.  The
decrease was due to a reduction in the charge for directors
warrants.
  Loss
from Operations
  The loss
from operations for the second quarter of 2008 was $513,851 compared to $640,209
for the second quarter of 2007.  This decreased loss was due to
decreased costs as discussed previously.
  11
  Other
Income and Expense
  Interest
income was $11,782 for the second quarter of 2008 compared to $2,989 in
2007.  Interest income increased because the Company had more cash on
hand to invest throughout the second quarter of 2008.
  Interest
expense was $170 in the second quarter of 2008 compared with $102,070 in the
second quarter of 2007.  This decrease reflects the elimination of
debt in the fourth quarter of 2007.
  Net
Loss
  The net
loss for the second quarter of 2008 was $502,239 compared to $739,290 for the
second quarter of 2007.  The decreased loss was due to the decrease in
expenses as previously described.
  Net loss
per share was $0.00 and $0.01 for the second quarter of 2008 and 2007
respectively.
  Six
Months Ended June 30, 2008 Compared with Six Months Ended June 30,
2007
  Revenue
  For the
six months ended June 30, 2008, revenue was $31,354 compared with $21,667 for
the six months ended June 30, 2007.  Revenue is recognized for
licensing and development fees over the period earned.
  Cost
of Revenues and Gross Margin
  Internal
development costs of $6,600 were recorded as cost of sales for the six months
ended June 30, 2008 compared with $11,400 for the comparable 2007
period.  Cost of revenues includes all direct costs, primarily wages
and research fees, associated with the acquisition and development of patents
and processes sold.  All direct costs, including some professional
fees associated with licensing negotiations, are also included in cost of
revenues.
  Operating
and Other Expenses
  Amortization
expense was $131,360 for both the six months ended June 30, 2008 and
2007.  Amortization expense relates primarily to the costs associated
with filing patent application and acquiring rights to the patents.
  Professional
and consulting fees totaled $324,999 for the six months ended June 30, 2008
compared with $492,309 for the six months ended June 30,
2007.  The decrease is due to lower fees, primarily legal, incurred
for 2008.
  Compensation
of $393,840 for the six months ended June 30, 2008 was higher than the
$321,710 reported for the comparable 2007 period.  Compensation
increased because of the restoration of salary decreases and increased medical
insurance costs.
  Other
general and administrative expenses increased to $262,587 for the six months
ended June 30, 2008 compared to $233,735 for the six months ended
June 30, 2007.  This increase was due to the accelerated vesting
of a former director’s warrants.
  Loss
from Operations
  The loss
from operations for the six months ended June 30, 2008 was $1,088,032
compared to $1,168,847 for the comparable 2007 period.  This decreased
loss was due to decreased costs as discussed previously.
  Other
Income and Expense
  Interest
income was $29,524 for the six months ended June 30, 2008 compared to
$9,976 for the six months ended June 30, 2007.  Interest income
increased because the Company had more cash on hand to invest throughout
2008.
  12
  Interest
expense was $480 in the six months ended June 30, 2008 compared with
$204,114 in the six months ended June 30, 2007.  This decrease
reflects the elimination of debt in the fourth quarter of 2007.
  Net
Loss
  The net
loss for the six months ended June 30, 2008 was $1,058,990 compared to
$1,318,391 for the six months ended June 30, 2007.  The decreased
loss was due to the smaller net loss from operations and the decrease in
interest expense.
  Net loss
per share was $0.01 for both six months ended June 30, 2008 and
2007.
  Liquidity
and Capital Resources
  At June
30, 2008, the Company had $818,483 in available cash.  Cash used by
operating activities year to date was $829,946.  This was due
primarily to the net loss of $1,058,990; however, net non-cash charges and
adjustments of $229,044 favorably impacted the computation of the net cash
used.  Cash used by investment activities was zero.  Net
cash provided by financing activities was zero.
  The
following table summarizes the due dates of our contractual
obligations.
  Total
              
              
              1
      Year
                Or Less
              
              
              More than 1 YearDeferred
      Compensation
              
              $
              60,500
              
              
              $
              60,500
              
              
              $
              -Office
      Lease
              
              
              42,492
              
              
              
              21,246
              
              
              
              21,246Total
              
              $
              102,992
              
              
              $
              81,746
              
              
              $
              21,246
 
  The
Company has relied primarily on equity funding plus debt financing for
liquidity.  The Company produced sales, licensing, and developmental
revenue starting in late 2005 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, may result in significant revenue, as further
described above.  In the meantime, the Company maintains a vigilant
cash conservation program.
  Subsequent
Events
  In May
2008 we entered into a letter of intent with DCL Medical Laboratories LLC, a
full-service clinical laboratory focused on women’s health, for the joint
development of an SVM-based computer assisted diagnostic test for the analysis
of cervical cells.  Through the application of the advanced technology
of pattern recognition, this new SVM-based system is intended to further improve
the sensitivity of the Pap test and augment the recent improvements of computer
guided screening that have already significantly improved detection
rates.  In addition, images and interpretative data from this new
SVM-based system may now be transmitted electronically, thus allowing remote
review and collaborative interpretation.  In July 2008, the Company
and DCL Medical Laboratories LLC entered into a Development and License
Agreement for the collaborative development and commercialization of SVM-based
computer assisted diagnostic tests for the independent detection of ovarian,
cervical and endometrial cancers, which expands the scope of the joint
development efforts.  Pursuant to the Development and License
Agreement, HDC will own any developed intellectual property and DCL Medical
Laboratories LLC will have a sole use license relating to applications and new
mathematical tools developed during the course of the Development and License
Agreement.  Dr. Hanbury, our new director, is currently President, CEO
and a shareholder of DCL  Medical Laboratories.
  On July
31, 2007, we announced our alliance and licensing agreement with Clarient, Inc.
for development of a new molecular diagnostic test for prostate cancer based on
our discovered prostate cancer biomarker signature.  Under the terms
of that agreement, Clarient, Inc. obtained an exclusive license to the biomarker
signature in exchange for HDC’s 30% royalty interest from all reimbursements of
the test once commercialized.  We and Clarient have successfully
completed all phases of the clinical trial process with the hope of achieving
the statistical significance necessary to validate the ability to commercialize
a test.  Results from both the Phase I, Phase II and Phase
III double-blinded clinical validation studies now completed at Clarient
demonstrated a very high success rate for identifying the presence of
Grade 3 or higher prostate cancer cells (clinically significant cancer), as
well as normal BPH (benign prostatic hyperplasia) cells.  Combining
all of the patients from all three phases of the clinical trials, the new
geno-based molecular diagnostic test achieved a Sensitivity rate of 90% for
correctly identifying the presence of Grade 3 or higher prostate cancer
cells, a Specificity rate of 97% for correctly identifying normal prostate cells
and a Specificity rate of 90% for identifying BPH cells, representing an overall
test accuracy of 93%.  With the completion of the clinical trial,
HDC’s new gene-based molecular diagnostic test is now ready for
commercialization to be used by physicians on their patients at risk of having
prostate cancer. The new prostate cancer test will be performed at Clarient’s
Clinical Laboratory in Aliso Viejo, CA. HDC will receive 30% royalty on each
test performed.
  13
  In August
2008, we announced the signing of an Agreement with Patent Profit International
(“PPI”), a Silicon Valley-based patent brokerage firm, with the goal of
marketing our patent portfolio and exclusive rights to SVM techniques and
applications beyond biomarker discovery and the healthcare field, to prospective
buyers/licensees in a wide range of technologies, including, but not limited to,
information technology such as Internet browsers and search engines, spam mail
detection, oil exploration, homeland security, and the automotive
industry.  As a requirement of any potential sale of the patent
portfolio, HDC expects to retain a royalty-free, worldwide, exclusive license,
with the right to grant sublicenses, in the entire field of healthcare to enable
our continued research, development, licensing and commercialization activities
in diagnostic and prognostic areas such as prostate cancer, ovarian cancer,
breast cancer, endometrial cancer, colon cancer, leukemia and other healthcare
arenas.
  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 failure to successfully develop a
profitable business, delays in identifying customers, and the inability to
retain a significant number of customers, as well as the risks and uncertainties
described in “Risk Factors” section to our Annual Report for the fiscal year
ended December 31, 2007, filed on March 31, 2008.
  Item
4T.  Controls and Procedures.
  As of
June 30, 2008 (the “Evaluation Date”), our Chief Executive Officer and
President, who is also serving as our Principal Financial Officer, carried out
an evaluation 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 concluded that, as of the Evaluation
Date, our disclosure controls and procedures were effective to provide
reasonable assurance that information required to be disclosed in the reports
that are filed or submitted under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified by the Securities and
Exchange Commission’s rules and forms and that our disclosure controls and
procedures are designed to ensure that information required to be disclosed in
the reports that we file or submit under the Exchange Act is accumulated and
communicated to our management including our Chief Executive Officer and
Principal Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
  14
  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.
  On the
Evaluation Date, our Principal Financial Officer resigned.  The
Company is undertaking a search process to identify a suitable
replacement.  Until we hire a replacement, our Chief Executive Officer
will serve as our Principal Financial Officer.
  15
  PART
II—OTHER INFORMATION
  Item
5.  Other Information.
  On May
13, 2008, we filed a registration statement on Form S-1 as required by the terms
of the private placement we completed in September, 2007 (the "Private
Placement") and first disclosed on Form 8-K, dated September 10,
2007.  The registration statement covers 51,538,822 shares of our
common stock if warrants with an exercise price of $0.14 per share are
exercised and 51,538,822 shares of our common stock if warrants with
an exercise price of $0.19 per share are exercised.  All of the warrants
are currently outstanding and were issued in the Private Placement.  We
will not receive any proceeds from any shares ultimately sold pursuant to the
registration statement.  However, we will receive cash upon the exercise of
the warrants of $17,007,811.26 if all of the warrants are exercised.  The
exercise price of the warrants is fixed, subject to adjustments for stock splits
or combinations.
  Item
6.  Exhibits.
  The
following exhibits are attached hereto or incorporated by reference herein
(numbered to correspond to Item 601(a) of Regulation S-K, as promulgated by the
Securities and Exchange Commission) and are filed as part of this Form
10-Q:
  31.1
              Rule
      13a-14(a)/15(d)-14(a) Certifications of Chief Executive Officer and
      Principal Financial Officer.32.1
              Section
      1350 Certification of Chief Executive Officer and Principal Financial
      Officer.
  16
  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:
      August 14, 2008
              /s/ Stephen D. Barnhill
M.D.Printed
      Name: Stephen D. Barnhill M.D.Title:
      Chief Executive Officer and Principal Financial
  Officer






17