**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      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 **** June
        30,
        2005
 
 [   ]  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.)
  1116
                      S. Old Temple Road
                    Lorena,
                      Texas 76655
                  
                  76655(Address
                      of principal executive offices)
                  
                  (Zip
                      Code)




(512)
                  583-4500(Issuer's
                  telephone number, including area
                  code)






(Former
                  name, former address and former fiscal year,
                if
                  changed since the last
                  report)




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






**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**


**PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS**






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






**APPLICABLE
      ONLY TO CORPORATE ISSUERS**






State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date: 113,357,637 shares of common stock, no par
      value, were issued and outstanding as of August 1, 2005.






Transitional
      Small Business Disclosure Format (Check one): Yes [  ] No [X]




Tableof
          Contents





**TABLEOF
      CONTENTS**





PagePART
                I
            FINANCIAL
                INFORMATIONItem
                1.
            Financial
                StatementsBalance
                Sheet
            1Statements
                of Operations
            2Statements
                of Cash Flows
            3Notes
                to Financial Statements
            4Item
                2.
            Management’s
                Discussion andAnalysis
                or Plan of Operation
            6Item
                3.
            Controls
                and Procedures
            8PART
                II
            OTHER
                INFORMATION
            8Item
                1.
            Legal
                Proceedings
            8Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            8Item
                6.
            Exhibits
                and Reports in Form 8-K
            10Signatures
            12Certifications
            13





Tableof
          Contents


**PART
      I.  FINANCIALINFORMATION**


**Item
      1.  FinancialStatements**


**HEALTH
      DISCOVERY CORPORATION**


**(FORMERLY
      KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)**


**(A
      Development Stage Company)**





**BalanceSheet**





**(Unaudited)**





**June
      30, 2005**





AssetsCurrent
                AssetsCash
            
            $
            514,625Employee
                Advances
            
            
            11,216Prepaid
                Expenses
            
            
            18,462Total
                Current Assets
            
            
            544,303Equipment,
                Less Accumulated Depreciation of $3,842
            
            
            10,129Other
                AssetsPatents,
                Less Accumulated Amortization of $262,217
            
            
            3,723,569Total
                Assets
            
            $
            4,278,001Liabilities
                and Stockholders’ EquityCurrent
                LiabilitiesAccounts
                Payable - Trade
            
            $
            284,852Accrued
                Liabilities
            
            
            292,887Current
                Portion of Long-Term Debt
            
            
            615,659Total
                Current Liabilities
            
            
            1,193,398Convertible
                Notes Payable
            
            
            865,603Total
                Liabilities
            
            
            2,059,001Commitments
                and ContingenciesStockholders’
                EquityCommon
                Stock, No Par Value, 200,000,000 Shares AuthorizedIssued
                and Outstanding 100,883,964 Shares
            
            
            6,918,865Paid
                for but not Issued 2,875,000 Shares
            
            
            370,625Deficit
                Accumulated During Development Stage
            
            
            (5,070,490
            )Total
                Stockholders' Equity
            
            
            2,219,000Total
                Liabilities and Stockholders' Equity
            
            $
            4,278,001





1
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          Contents


**HEALTH
      DISCOVERY CORPORATION**


**(FORMERLY
      KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)**


**(A
      Development Stage Company)**





**Statementsof
      Operations**





**(Unaudited)**





**For
      the Three and Six Months Ended June 30, 2005 and 2004**


**and
      the Period from April 6, 2001 (Date of Inception) to June 30,
      2005**











Three
                Months
            
            Three
                Months
            
            Six
                Months
            
            Six
                Months
            
            April
                6, 2001Ended
            
            Ended
            
            Ended
            
            Ended
            
            (Inception)
                toJune
                30,
            
            June
                30,
            
            June
                30,
            
            June
                30,
            
            June
                30,2005
            
            2004
            
            2005
            
            2004
            
            2005RevenuesCapital
                Gain (Loss) on Sale of Assets
            
            $
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (20
            )Dividend
                Income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            64Miscellaneous
                Income
            
            
            -
            
            
            14
            
            
            -
            
            
            14
            
            
            405Total
                Revenues
            
            
            -
            
            
            14
            
            
            -
            
            
            14
            
            
            449ExpensesAdministrative
                Fees
            
            
            6,506
            
            
            2,896
            
            
            7,456
            
            
            2,896
            
            
            65,065Amortization
            
            
            62,778
            
            
            8
            
            
            119,597
            
            
            17
            
            
            262,218License
                Fees
            
            
            -
            
            
            -
            
            
            30
            
            
            30
            
            
            242,527Outside
                Services
            
            
            3,000
            
            
            10,560
            
            
            3,000
            
            
            10,560
            
            
            83,841Professional
                and Consulting Fees
            
            
            384,057
            
            
            127,230
            
            
            832,099
            
            
            161,042
            
            
            2,304,531Compensation
            
            
            169,612
            
            
            192,833
            
            
            369,155
            
            
            359,166
            
            
            1,258,382Other
                General and Administrative Expenses
            
            
            203,051
            
            
            99,314
            
            
            425,587
            
            
            168,423
            
            
            854,375Total
                Expenses
            
            
            829,004
            
            
            432,841
            
            
            1,756,924
            
            
            702,134
            
            
            5,070,939Net
                Loss
            
            $
            (829,004
            )
            
            (432,827
            )
            
            (1,756,924
            )
            
            (702,120
            )
            
            (5,070,490
            )Average
                Outstanding Shares
            
            
            99,826,460
            
            
            72,392,795
            
            
            92,531,807
            
            
            69,484,401
            
            
            41,104,262Loss
                Per Share
            
            $
            (.01
            )
            
            (.01
            )
            
            (.02
            )
            
            (.01
            )
            
            (.12
            )








2
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          Contents


**HEALTH
      DISCOVERY CORPORATION**


**(FORMERLY
      KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)**


**(A
      Development Stage Company)**





**Statementsof
      Cash Flows**





**(Unaudited)**





**F** **or
      the Six Months Ended June 30, 2005 and 2004**


**and
      the Period from April 6, 2001 (Date of Inception) to June 30,
      2005**





Six
                Months
            
            Six
                Monhs
            
            From
                InceptionEnded
            
            Ended
            
            (April
                6, 2001)June
                30,
            
            June
                30,
            
            to
                June 30,2005
            
            2004
            
            2005Cash
                Flows From Operating ActivitiesNet
                Loss
            
            $
            (1,756,924
            )
            
            (702,120
            )
            
            (5,070,490
            )Adjustments
                to Reconcile Net Loss to Net CashUsed
                by Operating Activities:Noncash
                Compensation
            
            
            -
            
            
            -
            
            
            117,000Administrative
                Expenses Settled by Common Stock
            
            
            -
            
            
            -
            
            
            50,719Services
                Exchanged for Common Stock
            
            
            178,876
            
            
            -
            
            
            847,422Depreciation
                and Amortization
            
            
            121,720
            
            
            450
            
            
            266,060Increase
                in Employee Advances
            
            
            (11,216
            )
            
            -
            
            
            (11,216
            )Increase
                in Prepaid Expenses
            
            
            (18,462
            )
            
            -
            
            
            (18,462
            )Decrease
                (Increase) in Accounts Payable - Trade
            
            
            43,042
            
            
            30,786
            
            
            284,852Increase
                in Accrued Liabilities
            
            
            28,510
            
            
            17,728
            
            
            154,193Net
                Cash Used by Operating Activities
            
            
            (1,414,454
            )
            
            (653,156
            )
            
            (3,379,922
            )Cash
                Flows From Investing ActivitiesPurchase
                of Equipment
            
            
            (5,881
            )
            
            (5,196
            )
            
            (13,971
            )Amounts
                Paid to Acquire Patents
            
            
            (293,738
            )
            
            -
            
            
            (460,777
            )Net
                Cash Used by Investing Activities
            
            
            (299,619
            )
            
            (5,196
            )
            
            (474,748
            )Cash
                Flows From Financing ActivitiesRepayments
                of Notes Payable
            
            
            (293,279
            )
            
            (125,000
            )
            
            (769,871
            )Proceeds
                from Sales of Common Stock, Net
            
            
            2,358,500
            
            
            1,085,000
            
            
            5,139,166Net
                Cash Provided by Financing Activities
            
            
            2,065,221
            
            
            960,000
            
            
            4,369,295Net
                Increase in Cash
            
            
            351,148
            
            
            301,648
            
            
            514,625Cash,
                at Beginning of Period
            
            
            163,477
            
            
            76,589
            
            
            -Cash,
                at End of Period
            
            $
            514,625
            
            
            378,237
            
            
            514,625Non-Cash
                Investing and Financing Transactions:Patents
                Purchased Using Debt
            
            $
            185,272
            
            
            -
            
            
            2,660,749Stock
                Issued for Professional and Consulting Services
            
            $
            238,276
            
            
            589,746
            
            
            906,822Stock
                Issued for Administration Expenses
            
            $
            -
            
            
            50,719
            
            
            50,719Stock
                Issued for Patents
            
            $
            -
            
            
            864,261
            
            
            864,261Stock
                Issued for Convertible Notes Payable
            
            $
            409,616
            
            
            -
            
            
            409,616Non-cash
                Compensation Warrants
            
            $
            -
            
            
            -
            
            
            117,000Non-cash
                Stock Issuance Costs
            
            $
            166,451
            
            
            -
            
            
            212,440





3
 Tableof
          Contents


**HEALTH
      DISCOVERY CORPORATION**


**(FORMERLY
      KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)**


**(A
      Development Stage Company)**





**Notesto
      Financial Statements**





**NOTE
      A - BASIS OF PRESENTATION**


Health
      Discovery Corporation (formerly known as Direct Wireless Communications, Inc.)
      (the “Company”) has been in the development stage since the date of
      incorporation on April 6, 2001. The Company was primarily engaged in the
      activity of developing technology for a wireless telephone system until 2003,
      when it decided to abandon its efforts in the telecommunications industry and
      acquired new technologies in the biotechnology industry.





The
      accounting principles followed by the Company and the methods of applying these
      principles conform with accounting principles generally accepted in the United
      States of America (GAAP). In preparing financial statements in conformity with
      GAAP, management is required to make estimates and assumptions that affect
      the
      reported amounts in the financial statements. Actual results could differ
      significantly from those estimates.




The
      interim financial statements included in this report are unaudited but reflect
      all adjustments which, in the opinion of management, are necessary for a fair
      presentation of the financial position and results of operations for the interim
      periods presented. All such adjustments are of a normal recurring nature. The
      results of operations for the period ended June 30, 2005 are not necessarily
      indicative of the results of a full year’s operations. For further information,
      refer to the financial statements and footnotes included in the Company’s annual
      report on Form 10-KSB for the year ended December 31, 2004.





**NOTE
      B - NET LOSS PER SHARE**


Net
      loss
      per common share are based on the weighted average number of common shares
      outstanding during the period. The effects of potential common shares
      outstanding during the period would be included in diluted earnings (loss)
      per
      share; however, the effects of potential shares would be antidilutive during
      all
      periods presented.





**NOTE
      C - PATENTS**


The
      Company has acquired a group of patents related to biotechnology and certain
      machine learning tools used for diagnostic and drug discovery. Additionally,
      legal costs associated with patent acquisitions and the application process
      are
      also capitalized as a part of patents. The Company has recorded $3,723,569
      in
      patents and patent related costs, net of accumulated amortization, at June
      30,
      2005.




Amortization
      charged to operations for the three and six months ended June 30, 2005 and
      from
      the period from April 6, 2001 (date of inception) to June 30, 2005, was $62,778,
      $119,597 and $262,218, respectively. The weighted average amortization period
      for patents is approximately 15 years.




Estimated
      amortization expense for the next five years is $263,000 per year.





**NOTE
      D - ACQUISITIONS**


During
      the three months ended June 30, 2005 the Company acquired, or contractually
      agreed to acquire, the remaining interest in the SVM portfolio of patents from
      a
      group of unrelated third parties. The cost of the remaining interest consisted
      of a cash payment of $267,634, the issuance of promissory notes totaling $37,871
      and convertible notes totaling $147,401. The convertible notes were converted
      by
      the holders immediately upon issuance in exchange for 487,441 shares of common
      stock.







**NOTE
      E - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE**




Notes
                payable consist of the following:Note
                payable to individuals, bearing interest at 6% payable in quarterly
                installments of $62,500 with a final payment due on October 1,
                2005
            
            $
            62,500Notes
                payable to individuals, with imputed interest computed at 3.16% with
                installments due every fourth month with a final payment due May
                1,
                2006
            
            
            553,159Total
                current notes payable
            
            $
            615,659












4
 Tableof
          Contents





**HEALTH
      DISCOVERY CORPORATION**


**(FORMERLY
      KNOWN AS DIRECT WIRELESS COMMUNICATIONS, INC.)**


**(A
      Development Stage Company)**





**Notes
      to Financial Statements**









**NOTE
      E - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE,
      continued**


Convertible
      notes in an aggregate amount of $865,603 mature on July 28, 2009, and may be
      converted at the election of the noteholders until that time into shares of
      the
      Company’s Common Stock at $.17 per share. If the notes are converted, the
      noteholders contractually agreed not to sell more than 10% of such holder’s
      shares in any calendar quarter after the minimum holding period has expired.
      The
      convertible notes bear interest at a rate of 3.16%.





All
      of
      the Company’s debt is secured by specific patents in the Company’s patent
      portfolio.





During
      2005, convertible note holders elected to convert their debt to shares of the
      Company’s stock. The conversion reduced the debt by $409,616 in exchange for
      2,409,505 shares of common stock.





On
      August
      4, 2005 a convertible note holder elected to convert his debt to shares of
      the
      Company’s stock. The conversion reduced the debt by $135,424 in exchange for
      796,612 shares of common stock.





**NOTE
      F - STOCKHOLDERS’ EQUITY**


On
      March
      10, 2005, the Company finalized a sale of shares of restricted common stock
      to
      accredited investors through a private placement offering. The price of the
      restricted stock was $.16 per share. In addition, each purchaser of the shares
      received a warrant to acquire an equal number of common shares at a fixed price
      of $0.24 per share until December 2008. No portion of the proceeds was assigned
      to the value of the warrants because the exercise price of the warrant exceeded
      the market value of the underlying common stock on the date of purchase. A
      total
      of 13,018,750 restricted common shares were sold to accredited individual
      investors for $1,798,924, net of issuance costs of $284,076. The issuance cost
      consisted of $157,000 in cash, 806,250 warrants, each entitling the holder
      to
      buy one share of the Company’s common stock for $0.24 valued at $120,958, and
      17,480 of Company shares valued at $6,118 which was paid or accrued to
      consultants for assistance in selling the Company’s common stock.





During
      the second quarter of 2005, the Company extended its fundraising efforts through
      the sale of common stock to accredited investors through a private sale. The
      price of the restricted stock was $.16 per share. In addition, each purchaser
      of
      stock shares was granted a warrant to acquire an equal number of restricted
      common shares at a fixed price of $0.24 per share until December 2008. No
      portion of the proceeds was assigned to the value of the warrants because the
      exercise price of the warrant exceeded the market value of the underlying common
      stock on the date of purchase. As of June 30, 2005, a total of 3,031,250
      restricted common shares were sold to accredited investors for $393,125, net
      of
      issuance costs of $91,875. The issuance cost consisted of $52,500 in cash,
      262,500 warrants, each entitling the holder to buy one share of common stock
      for
      $0.24 valued at $39,375, which was paid or accrued to consultants for assistance
      in selling the Company’s common stock As of June 30, 2005, 2,875,000 common
      shares and related warrants had not been issued to the purchasers and,
      accordingly, are recorded as common shares purchased and not issued on the
      Company’s balance sheet.





Subsequent
      to June 30, 2005, the Company continued its private placement. An additional
      9,062,500 shares were sold for proceeds of $1,450,000. Pursuant to the terms
      of
      various placement agency agreements by and between the Company and placement
      agents, the Company will
      pay
      a cash fee of approximately $145,000 and will issue
      warrants to acquire 25,200 shares of common stock to the placement agents,
      and
      or their designees. The warrants were issued as consideration for services
      as
      the Company’s placement agents.




Shares
      Issued in Exchange for Services




During
      2005, the Company issued 1,097,620 common stock shares to consultants for
      services. The shares were granted at the fair market value of the services
      provided. Total consultant expense of $178,867 and $78,746 was recorded for
      the
      issuance in 2005 and 2004, respectively.


5
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As
      noted
      above, the Company has issued or committed to issue shares of the Company’s
      common stock and warrants to purchase the Company’s common stock to certain
      consultants in exchange for their assistance in selling Company shares. The
      value of Company stock was derived based on a contractual arrangement based
      on a
      percentage of the funds raised to be settled with the issuance of the Company’s
      shares at $.35 per share. The values of the warrants were calculated using
      the
      Black-Scholes option-pricing model.





**Item
      2.**  **Management’sDiscussion
      and Analysis or Plan of
      Operation.**





**Our
      Corporate Strategy**





Our
      goal
      is to develop a product line of newly discovered biomarkers and pathways, which
      will include human genes and genetic variations, as well as gene, protein,
      and
      metabolite expression differences. In drug discovery, biomarkers can help elicit
      disease targets and pathways and validate mechanisms of drug action. They may
      also be pharmacodynamic indicators of drug activity, response and toxicity for use in clinical
      development.





We
      intend
      to provide pharmaceutical and diagnostic companies with all aspects of “first
      phase” diagnostic and drug discovery from expert assessment of the clinical
      dilemma through proper selection and procurement of high quality specimens.
      We
      will then apply our proprietary analytical evaluation methods and
      state-of-the-art computational analysis to produce relevant and accurate
      clinical data, producing accurate biomarker and pathway discoveries, resulting
      in patent protection of our biomarker discoveries for future
      development.





“First
      Phase Biomarker Discovery” is based on the belief that in order to discover the
      most clinically relevant biomarkers, the computational component must begin
      at
      the inception of the clinical dilemma to be solved. This pathway includes
      several critical levels of decision-making - all of which are part of our
      business strategy.





The
      goal
      of Health Discovery Corporation is to produce more relevant and predictable
      biomarkers for drug discovery so that new and better medicines and diagnostic
      markers can be developed for patients worldwide.





With
      the
      completion of the acquisition of the SVM portfolio of patents the company now
      has begun the process to license the use of this technology.





**Cash
      Requirements**





The
      Company’s two-pronged plan to have sufficient cash to support operations on a
      going-forward basis is comprised of generating revenue through licensing the
      Company's significant patent portfolio or providing services related to those
      patents and obtaining additional equity or debt financing. The Company has
      been
      and continues to be in meaningful discussions, which if successful, will result
      in significant revenue. The Company recently secured $1,935,000 through the
      private sale to accredited investors of shares of Company common stock, which
      management believes will be sufficient, together with the Company's existing
      cash, to support the Company's operations through February 2006.




As
      of
      August 9, 2005, the Company had approximately $1,616,000 in cash. Recurring
      monthly operating expenses for the remainder of 2005, including salaries, are
      expected to be approximately $147,000.  A significant portion of our
      cash
      will be used to satisfy the Company’s outstanding debt obligations related to
      the acquisition of the Fractal and SVM assets.  The final payments of
      $62,500 on the note resulting from the acquisition of the assets of Fractal
      Genomics Corporation will be due in October 2005.  Scheduled payments
      of
      $188,280 (including interest) on notes resulting from the acquisition of the
      SVM
      Portfolio will be due on September 1, 2005, January 1, 2006, and May 1, 2006.





We
      have
      not realized any earned income since inception. However,
      we have entered into agreements with MD Anderson Cancer Center, Stanford
      University Medical Center and The University of Miami to perform analyses of
      clinical data using our computational technologies, which we expect will earn
      income after the identification, patent protecting and licensing of newly
      discovered biomarkers. We have secured both joint ownership rights and/or first
      options for worldwide exclusive rights to our discoveries in these contracts. After
      the
      close of the second quarter of 2004, we acquired the rights to a portfolio
      of
      patents that had initially been issued to Dr. Barnhill, our Chief Executive
      Officer, and to several members of our Scientific Advisory Board. Those patents,
      together with pending applications included in the portfolio, relate primarily
      to Support Vector Machines (SVM’s), which have applications in a wide variety of
      disciplines in which it is necessary to analyze complex data sets. We expect
      to
      be able to generate a stream of income by licensing the use of SVMs covered
      by
      the patents. To date, we
      have
      been able to fund our operations though a private offering of our common stock
      under rules providing exemptions for such offerings and will continue to do
      so.





During
      the remainder of 2005, we plan to focus on one or more of the initiatives listed
      below. Management’s time and fiscal resources will be allocated among the
      projects based on management’s judgment as to when discoveries in these areas
      can
      be achieved and the possibility of securing revenue from those discoveries.
      Management cannot guarantee that any discovery will result from any of the
      following projects or that the Company could obtain revenue from any such
      discovery. Further, new initiatives may arise that management believes would
      be
      more beneficial to the Company. Initially, the five initiatives
      are:







6
 Tableof
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**Circulating
      Tumor Cell Analysis** - The
      Company is attempting to use SVMs to analyze digitized images of blood cells
      to
      identify circulating tumor cells. The Company believes this project can be
      completed with current salaried personnel and equipment. We expect no
      significant additional costs to be incurred on this project during
      2005.





**Prostate
      Cancer Diagnostics** - The
      Company has identified biomarkers that have the potential to be useful in the
      diagnosis of prostate cancer with a much higher degree of accuracy than existing
      tests, including the PSA test. In addition, these biomarkers appear to allow
      us
      to differentiate high grade prostate cancer from the less serious low grade
      prostate cancer. This project is in the final validation phase. We plan to
      spend
      approximately $50,000 to complete this final validation, which we expect to
      complete by the end of 2005.





**BPH
      Drug Target** - While
      performing our analysis of prostate cancer specimens to discover a new biomarker
      for diagnosing prostate cancer, we discovered a number of genes that appear
      to
      be over expressed in patients with Benign Prostatic Hyperplasia (BPH). Upon
      validation of this discovery, we plan to license the discovery to a
      pharmaceutical company. This set of biomarkers could be used as a drug target
      by
      the pharmaceutical company to develop a new drug to treat BPH. All research
      and
      development related to this project will be done in conjunction with the
      prostate cancer diagnostic project. No additional expenses are
      expected.





**Breast
      Cancer (lymphangiogenesis)** - In
      March 2004 we entered into an agreement with Stanford University to use our
      FGM
      computational techniques to identify new patterns of biomarkers in lymphatic
      insufficiency and its response to therapeutic lymphangiogenesis. This
      project will be completed with in-house, salaried personnel. We expect no
      significant additional costs to be incurred before completion of this
      project.





**Differential
      Diagnosis for Leukemia** - The
      Company will be validating our discovery of a set of leukemia genes that have
      been shown to separate ALL-T-cell leukemia from ALL-B-cell leukemia with 100%
      accuracy. We expect to incur approximately $50,000 in costs to complete this
      validation.





**Additional
      Funding Requirement**





We
      believe we have sufficient cash to continue operations through February, 2006
      based on our current cash flows. Therefore, our continued operations will depend
      on the production of revenue and/or the receipt of additional funding. Efforts
      to reach license agreements with companies using SVM Technologies are currently
      in process. In addition, while we have entered into agreements to perform
      analyses of clinical data using our computational technologies, we will earn
      income from those efforts only after the identification, patenting, and
      licensing of new biomarkers.





Based
      on
      the current resources available to us, we will need additional equity or debt
      financing or we will need to generate revenues through licensing our products
      or
      providing services to others or entering into strategic alliances to be able
      to
      sustain our operations until we can achieve profitability. These matters raise
      substantial doubt about our ability to continue as a going concern.





The
      Company does not anticipate purchase or sale of plant or significant equipment.
      The Company also does not anticipate significant changes in the number of
      employees.





**Off
      Balance Sheet Arrangements**





The
      Company does not have any off-balance sheet arrangements.





**Forward-Looking
      Statement**





This
      Report contains statements which constitute forward-looking statements within
      the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
      the
      Securities Exchange Act of 1934. These statements appear in a number of places
      in this Report and include all statements regarding the intent, belief or
      current expectations of the Company, its directors or its officers with respect
      to, among other things: (i) the Company’s financing plans; (ii) trends affecting
      the Company’s financial condition or results of operations; (iii) the Company’s
      growth strategy and operating strategy; and (iv) the declaration and payment
      of
      dividends. Investors are cautioned that any such forward-looking statements
      are
      not guarantees of future performance and involve risks and uncertainties, and
      that actual results may differ materially from those projected in the
      forward-looking statements as a result of various factors discussed herein
      and
      those factors discussed in detail in the Company’s other filings with the
      Securities and Exchange Commission.


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**Item
      3. Controlsand Procedures.**





As
      of the
      end of the period covered by this report (the "Evaluation Date"), we carried
      out
      an evaluation, under the supervision and with the participation of our
      management, including our Chief Executive Officer and Chief Administrative
      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. Based upon this evaluation, our Chief Executive Officer
      and our Chief Administrative Officer concluded that, as of the Evaluation Date,
      our disclosure controls and procedures were effective under Rule
      13a-15.





Because
      of the inherent limitations in all control systems, no evaluation of controls
      can provide absolute assurance that the Company’s disclosure controls and
      procedures will detect or uncover every situation involving the failure of
      persons within the Company to disclose material information otherwise required
      to be set forth in the Company’s periodic reports.





The
      Company’s management is also responsible for establishing and maintaining
      adequate internal control over financial reporting to provide reasonable
      assurance regarding the reliability of financial reporting and the preparation
      of financial statements for external purposes in accordance with generally
      accepted accounting principles. The Company previously had been notified by
      it’s
      outside independent auditing firm of material weaknesses in its internal
      controls over financial reporting.  During 2005, the Company made
      corrective actions in its internal controls over financial reporting, including
      establishing reporting procedures and communication protocols with the Company’s
      accountants and auditors, and management believes that the controls are
      currently effective.





**PART
      II—OTHERINFORMATION**





**Item
      1. LegalProceedings.**





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 7,000,000 shares of our common stock (4,900,000 after a 7-1 stock split)
      issued to Mr. Williams, Mr. Walker 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 sought 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 canceled upon return to the Company as full and final
      settlement of the claims brought in the afore mentioned lawsuit. 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 canceled upon return to the
      Company.





In
      July
      2004, W. Steven Walker Esq., former general council, an officer and director
      of
      the Company, agreed to settle with the Company and return 366,000 shares of
      our
      common stock, which was all of the shares then owned by him, and he will no
      longer be a party to the suit. Accordingly, only the shares originally issued
      to
      Mr. Williams are subject to the suit, and the Company believes he controls
      approximately 2.1 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.




**Item
        2. UnregisteredSales of Equity Securities
        and Use of
        Proceeds.**
 
 On
        March
        10, 2005, the Company finalized a sale of shares of restricted common stock
        to
        accredited investors through a private placement offering. The price of the
        restricted stock was $.16 per share. In addition, each purchaser of the shares
        received a warrant to acquire an equal number of common shares at a fixed
        price
        of $0.24 per share until December 2008. No portion of the proceeds was assigned
        to the value of the warrants because the exercise price of the warrant exceeded
        the market value of the underlying common stock on the date of purchase.
        A total
        of 13,018,750 restricted common shares were sold to accredited individual
        investors for $1,798,924, net of issuance costs of $284,076. The issuance
        cost
        consisted of $157,000 in cash, 806,250 warrants, each entitling the holder
        to
        buy one share of the Company’s common stock for $0.24


8
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valued
      at
      $120,958, and 17,480 of Company shares valued at $6,118 which was paid or
      accrued to consultants for assistance in selling the Company’s common stock. The
      shares were offered and sold in reliance upon exemptions from registration
      pursuant to Section 4(2) under the Securities Act of 1933, as amended, and
      Regulation D promulgated thereunder. Based on the information provided by each
      of the investors, all investors qualify as accredited investors (as defined
      by
      Rule 501 under the Securities Act of 1933, as amended).




During
      the second quarter of 2005, the Company extended its fundraising efforts through
      the sale of common stock to accredited investors through a private sale. The
      price of the restricted stock was $.16 per share. In addition, each purchaser
      of
      stock shares was granted a warrant to acquire an equal number of restricted
      common shares at a fixed price of $0.24 per share until December 2008. No
      portion of the proceeds was assigned to the value of the warrants because the
      exercise price of the warrant exceeded the market value of the underlying common
      stock on the date of purchase. As of June 30, 2005, a total of 3,031,250
      restricted common shares were sold to accredited investors for $393,125, net
      of
      issuance costs of $91,875. The issuance cost consisted of $52,500 in cash,
      262,500 warrants, each entitling the holder to buy one share of common stock
      for
      $0.24 valued at $39,375, which was paid or accrued to consultants for assistance
      in selling the Company’s common stock As of June 30, 2005, 2,875,000 common
      shares and related warrants had not been issued to the purchasers and,
      accordingly, are recorded as common shares purchased and not issued on the
      Company’s balance sheet. The shares were offered and sold in reliance upon
      exemptions from registration pursuant to Section 4(2) under the Securities
      Act
      of 1933, as amended, and Regulation D promulgated thereunder. Based on the
      information provided by each of the investors, all investors qualify as
      accredited investors.




Subsequent
      to June 30, 2005, the Company continued its private placement. An additional
      9,062,500 shares were sold for proceeds of $1,450,000. Pursuant to the terms
      of
      various placement agency agreements by and between the Company and placement
      agents, the Company will
      pay
      a cash fee of approximately $145,000 and will issue
      warrants to acquire 25,200 shares of common stock to the placement agents,
      and
      or their designees. The warrants were issued as consideration for services
      as
      the Company’s placement agents. The shares were offered and sold in reliance
      upon exemptions from registration pursuant to Section 4(2) under the Securities
      Act of 1933, as amended, and Regulation D promulgated thereunder. .





Under
      the
      private placement, the Company agreed to use its best efforts to file a
      registration statement to register the shares of common stock and the shares
      underlying the warrants issued and sold to the investors by May 9, 2005, and
      to
      use its best efforts to cause the registration statement to be declared
      effective within 120 days of May 9, 2005. On May 9, 2005, the Company filed
      a
      preliminary registration statement with the Securities and Exchange Commission
      but as of the date hereof, such registration statement has not been declared
      effective.





9
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**Item
      6. Exhibitsand Reports on Form 8-K.**





**A
      Exhibits**




(A)
      EXHIBITS. The following exhibits are attached hereto or incorporated by
      reference herein (numbered to correspond to Item 601(a) of Regulation S-B,
      as
      promulgated by the Securities and Exchange Commission):




3.1
            Articles
                of Incorporation. Registrant incorporates by reference Exhibit 3.1
                to
                Registration Statement on Form SB-2, File No. 333-62216, filed June
                4,
                2001.3.1
                (a)
            Articles
                of Amendment to Articles of Incorporation Registrant incorporates
                by
                reference Exhibit 2.2 to Form 10-QSB, File No. 333-62216, filed November
                14, 2001.3.1(b)
            Articles
                of Amendment to Articles of Incorporation changing Registrant name
                from
                Direct Wireless Communications, Inc., to Health Discovery Corporation.
                Registrant incorporates by reference Exhibit 3.1 (b) to Form 10-KSB
                File
                No. 333-62216 filed March 3, 2004.3.2
            By-Laws.
                Registrant incorporates by reference Exhibit 3.2 to Registration
                Statement
                on Form SB-2, File No. 333-62216, filed June 4, 2001.4.1
            Copy
                of Specimen Certificate for shares of common stock. Registrant
                incorporates by reference Exhibit 4.1 to Registration Statement on
                Form
                SB-2, File No. 333-62216, filed June 4, 2001.4.1
                (b)
            Copy
                of Specimen Certificate for shares of common stock. Registrant
                incorporates by reference Exhibit 4.1 (b) to Form 10-KSB File No.
                333-62216 filed March 30, 2004.4.2
            Excerpt
                from By-Laws. Registrant incorporates by reference Exhibit 4.2 to
                Registration Statement on Form SB-2, File No. 333-62216, filed June
                4,
                2001.4.2(A)
            Corrected
                Article 3.02 of By-Laws. Registrant incorporates by reference Exhibit
                4.2(A) to Amendment No. 2 to Registration Statement on Form SB-2,
                File No.
                333-62216, filed August 15, 2001.4.3(a)*
            Non
                Qualified stock option agreements dated October 30, 2003 between
                registrant and David Cooper. Registrant incorporates by reference
                Exhibit
                4.3(a) to Form 10-KSB, File No. 333-62216, filed March 30,
                2004.10.1
            Asset
                purchase agreement between registrant dated September 15, 2003 and
                Barnhill Group LLC. Registrant incorporates by reference Exhibit
                10.2 to
                Form 10-KSB, File No. 333-62216, filed March 30, 2004.10.2
            Asset
                purchase agreement between registrant dated December 30, 2003 and
                Fractal
                Genomics LLC. Registrant incorporates by reference Exhibit 10.3 to
                Form
                10-KSB, File No. 333-62216, filed March 30, 2004.10.3*
            Employment
                Agreement with Stephen Barnhill. Registrant incorporates by reference
                Exhibit 10.3 to Form 10-KSB, File No. 333-62216, filed April 19,
                2005.10.4*
            Employment
                Agreement with David Cooper. Registrant incorporates by reference
                Exhibit
                10.4 to Form 10-KSB, File No. 333-62216, filed April 19,
                2005.10.5
            Form
                of Asset Purchase agreement between the registrant and the sellers
                of the
                SVM Portfolio and related assets. Registrant incorporates by reference
                Exhibit 10.5 to Form 10-KSB, File No. 333-62216, filed March 30,
                2004.10.6
            Form
                of Securities Purchase Agreement. Registrant incorporates by reference
                Exhibit 10.6 to Form 10-KSB, File No. 333-62216, filed April 19,
                2005.10.7
            Form
                of Warrant. Registrant incorporates by reference Exhibit 10.7 to
                Form
                10-KSB, File No. 333-62216, filed April 19, 2005.10.8
            Form
                of Securities Purchase Agreement. Registrant incorporates by reference
                Exhibit 10.8 to Form 10-KSB, File No. 333-62216, filed April 19,
                2005.


10
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10.9
            Form
                of Warrant. Registrant incorporates by reference Exhibit 10.9 to
                Form
                10-KSB, File No. 333-62216, filed April 19, 2005.31.1
            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 Chief Administrative
                Officer.32.1
            Section
                1350 Certification of Chief Executive Officer.32.2
            Section
                1350 Certification of Chief Administrative
                Officer




*
      The
      indicated exhibit is a compensatory plan required to be filed as an exhibit
      to
      this Form 10-KSB






(B)
      REPORTS ON FORM 8-K.







11
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SIGNATURES





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









Health
                Discovery Corporation
              RegistrantDate: August 15, 2005
            /s/
                Stephen D. Barnhill
                M.D.
              Printed
                Name: Stephen D. Barnhill M.D.
              Title:
                Chief Executive OfficerDate: August 15, 2005
            /s/ Robert S. Braswell
              IV
              Printed
                Name: Robert S. Braswell IV
              Title:
                Chief Financial Officer / Secretary