HEALTH DISCOVERY CORPORATION 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
Objective
The objective of our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is to provide users of our financial statements with the following:
· A narrative explanation from the perspective of management of our
financial condition, results of operations, cash flows, liquidity and
certain other factors that may affect future results;
· Useful context to the financial statements; and
· Information that allows assessment of the likelihood that past performance
is indicative of future performance.
Our MD&A is provided as a supplement to, and should be read together with, our
unaudited financial statements for the three and nine months ended
18 Overview
Our historical foundation lies in the molecular diagnostics field where we have made a number of discoveries that may play a role in developing more personalized approaches to the diagnosis and treatment of certain diseases. However, our Support Vector Machines ("SVM") assets in particular have broad applicability in many other fields. Intelligently applied, our pattern recognition technology can be a portal between enormous amounts of otherwise undecipherable data and truly meaningful discovery.
Our principal asset is our intellectual property, which includes advanced mathematical algorithms called SVM, as well as biomarkers that we discovered by applying our SVM techniques to complex genetic and proteomic data. Biomarkers are biological indicators or genetic expression signatures of certain disease states. Our intellectual property is protected by 21 patents that have been issued or are currently pending around the world.
Our business model has evolved over time to respond to business trends that intersect with our technological expertise and our capacity to professionally manage these opportunities. In the beginning, we sought only to use our SVMs internally in order to discover and license our biomarker signatures to various diagnostic and pharmaceutical companies. Today, our commercialization efforts include: utilization of our discoveries and knowledge to help develop diagnostic and prognostic predictive tests; licensing of the SVM technologies directly to diagnostic companies; and, the potential formation of new ventures with domain experts in other fields where our pattern recognition technology holds commercial promise.
The Company markets its technology and related developmental expertise to prospects in the healthcare, 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 may produce favorable results in the future.
Intellectual Property Developments and Patent Defense Matters
As previously disclosed in our 2020 Form 10-K, the United States Patent and
Trademark Office ("USPTO") has issued a Notice of Allowance of Patent
Application Number 14/754,434 covering the four-gene prostate cancer test
developed using the Company's proprietary SVM-RFE technology. The allowed claims
cover a method for screening for and treating prostate cancer by measuring
expression levels of the four genes within a patient sample compared to one or
more reference genes and generating a prediction score based on the averaged
relative expression levels. This Notice of Allowance is important after
encountering the significant barriers to patenting of biomarkers that had been
raised by the
We believe that this patent demonstrates the ability of the Company's proprietary technology in the discovery and validation of biomarkers for diseases. We believe this same method can be applied to numerous different diseases and will explore opportunities with partners to deploy these same methods using our proprietary technology in biomarker discovery.
We hold the exclusive rights to 20 issued
19 Intel Matter
As previously disclosed, the USPTO had declared an Interference between the
Company's Support Vector Machine - Recursive Feature Elimination ("SVM-RFE")
patent application and Intel Corporation's ("Intel") Patent No. 7,685,077,
entitled "Recursive Feature Eliminating Method based on a Support Vector
Machine". On
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20 COVID-19
In
The intense focus on COVID-19 has also led to the suspension of clinical trials and research projects relating to other conditions, which may impact our ability to form new contractual arrangements to exploit our technology. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock.
The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors which we cannot reasonably predict, including the duration and scope of the pandemic; governmental, business and individuals' actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may materially and adversely affect our business and financial condition.
RESULTS OF OPERATIONS
Three and Nine Months Ended
Revenue for the three and nine months ended
Operating and Other Expenses
Professional and consulting fees were
Legal fees were
Compensation consists of expenses related to officer salaries and were
21
Other general and administrative expensesincreased to
Loss from Operations for the three months ended
Other income and expense remained
Net loss for the three months ended
Diluted loss per share was
Liquidity and Capital Resources
Introduction
We have relied primarily on equity and debt financing for liquidity, and most recently, proceeds from intellectual property litigation or arbitration. The Company produced sales, licensing, and developmental revenue starting in late 2005 and must increase revenues in order to generate sufficient cash to continue operations. Our plan to have sufficient cash to support operations is comprised of:
· generating revenue through licensing our patent portfolio; · providing services related to those patents; · protecting our proprietary technology against infringers; and · obtaining additional equity or debt financing.
We are pursuing licensing activity and collaborations to increase revenue.
Additionally, we are evaluating options to secure funding for infringement
activities to protect our proprietary technology or other forms of fund-raising
either in the debt or equity markets. None of these options are definitive and
there is no guarantee we will be successful in these fund-raising efforts. In
addition, while the potential economic impact brought by and the duration of the
COVID-19 pandemic may be difficult to assess or predict, it has already caused,
and is likely to result in further, significant disruption of global financial
markets, which may reduce our ability to access capital either at all or on
favorable terms. At
22 Short-term borrowings
Our principal commitments consist of our obligations under our operating lease
which is short-term in nature. In addition, in
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.
Critical Accounting Policies and Estimates
Refer to Note 2 - Significant Accounting Policies.
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