Dear Fellow Owners of Health Discovery Corporation,
On behalf of the Health Discovery Corporation team, I want to address the questions about what the new management team has been up to over the past seven months. The following is a recap of recent activities at Health Discovery Corporation ("HDC" or the “Company”).
We have figured out how to reduce our burn rate to less than $50,000 per month while maintaining funding for what we have determined to be realistic opportunities. This is a major accomplishment as prior management teams left HDC in very distressed financial circumstances by spending between $185,000 and $250,000 per month with no commercial success. In addition to achieving a huge reduction in our burn rate, we are in the process of seeking an additional source of funds to help ensure our viability.
We have begun to receive funding for Series C Preferred Shares (“Series C”) sale. So far, we have sold two million preferred shares at $0.08 for a total of $160,000. The Series C shares feature $0.08 warrants and $0.08 contingency warrants. The contingency warrants will be issued only if the company has not been profitable by the end of the 1st Quarter 2016. The goal is to raise a maximum of $1,000,000 funds via the Series C. This funding is anti-dilutive because the purchase price is significantly higher than the current 180-day average share price. This funding, along with a significantly reduced burn rate, will allow the Company to increase its chance for achieving commercial success. Assuming no additional Series C shares are sold and no revenue or alternative financing from any other source is realized, we estimate there are sufficient funds to continue operations through approximately 1st Quarter 2015. Without the reduced burn rate, the Company would have already run out of cash.
Our goal of monetizing SVM Capital, LLC (“SVMC”) appears to be gaining some traction. Mark Moore, SVMC's portfolio manager, began live trading in November 2012 and over the past fifteen months has achieved outstanding results in terms of risk/reward metrics. In January 2014, SVMC entered a three-month investment performance competition with nineteen other hedge funds and currently ranks fifth. The winners get an opportunity to manage as much as $20 million from the sponsor. That is consistent with SVMC's immediate goal of creating a quantitative hedge fund utilizing its proprietary SVM-based investment algorithm. We believe SVMC's actual performance will lead to discussions with potential "anchor" investors soon. One clear differentiating characteristic of SVMC is that portfolio changes are made only four times a year. Historically, HDC has successfully applied its SVM expertise to static, linear data in the medical diagnostics arena. Our ability to apply SVM's to dynamic, non-linear data in a completely different area, the stock market, is a major accomplishment in and of itself. But it may also add to HDC's credibility as we seek to enter fields such as internet search, Homeland security, data mining, imaging, etc. that we've not previously been involved in where we believe "supervised machine learning" with SVM's and SVM-RFE's can make significant contributions.
In the past seven months we have focused most of our energy on strengthening the NeoGenomics relationship, which previously did not have the degree of attention and urgency it required. This relationship is vitally important to HDC, as we believe each successful collaboration with NeoGenomics will build confidence and lead to an increasing volume of business. As previously disclosed, NeoGenomics is working hard to bring to market several new products utilizing HDC’s technology including their prostate cancer test and a new cytogenetic interpretation software program. We are hopeful these products become commercially available this year but this will be solely up to NeoGenomics. We have visited their California labs a number of times in the past seven months to help them advance product development and to understand how we can better work together. We also engage in several videoconference meetings each month with the same goal. In order for HDC to be successful, we need for NeoGenomics to be successful in bringing to market new or improved products. We believe our technology can help them develop those products. We appreciate the patience that NeoGenomics' management has shown in giving us time to rebuild our relationship and prove to them that HDC indeed has now become the valuable partner they always expected us to be.
At this time the Retinalyze product needs to be re-developed. We have received feedback from eye care professionals and shareholders suggesting that the product should be developed using laser scans versus optical images. Basically, the software needs to be advanced to catch up with the technology currently being used in the industry. This product has been determined to be a longer-term opportunity so it has been put on the back burner while we focus on NeoGenomics.
With respect to monetizing our IP, we have filed another interference request for the Intel patent that we believe references prior art patented by HDC. We remain confident the Company has the first SVM-RFE patent. We have met with both contingency funding companies and contingency fee lawyers for the same purpose of monetizing our IP. We believe that other companies are infringing upon our IP. Although these opportunities seem simple and straightforward, it will take more time to gather the information that the contingency fee companies require prior to them taking over the funding. Given our inherited financial situation, and a realistic expectation that this is not quite as ready as the products being developed with NeoGenomics, we continue to work in the IP monetization only with limited resources. However, we are maintaining our IP and correspondence with the infringers so that we can obtain reimbursement from them eventually. We are hopeful that at some point, they will have the integrity to do what several other companies have done, which is to license our IP and compensate us for contributing to their company’s growth. If this doesn’t occur, we still have the contingency fee companies prepared to help once we have all the answers that they are looking for.
We appreciate everyone’s patience as we transition towards a commercially viable company.
With kind regard on behalf of Health Discovery Corporation,
/s/ Kevin Kowbel
Interim Chief Executive Officer and Chairman
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, the accuracy of which is necessarily subject to risks and uncertainties, including, without limitation, statements regarding future performance, opportunities and investments, and anticipated results in general. From time to time the Company may make other forward-looking statements in relation to other matters, including without limitation, commercialization plans and strategic partnerships. Actual results may differ materially due to a variety of factors, including, among other things, the acceptance of our approach to applying mathematics computer science and physics into the disciplines of biology, organic chemistry and medicine and our products and technologies associated with those approaches, the ability to develop and commercialize new drugs, therapies, medical devices, or other products based on our approaches, and other factors set forth from time to time in the Company’s Securities and Exchange Commission filings.
All forward-looking statements and cautionary statements included in this document are made as of the date hereof based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement or cautionary statement.