Edgar Filing: NEOGENOMICS INC

forms1.htm

As filed with the U.S. Securities and Exchange Commission on June 3, 2008

Registration No. 333-126754

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO. 3

FORM SB-2 ON FORM S-1/A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Nevada	NeoGenomics, Inc.	74-2897368
(State or Other Jurisdiction of Incorporation or Organization)	(Name of Registrant in Our Charter)	(I.R.S. Employer Identification No.)

		Robert P. Gasparini
12701 Commonwealth Drive, Suite 9		12701 Commonwealth Drive, Suite 9
Fort Myers, Florida 33913		Fort Myers, Florida 33913
(239) 768-0600	8731	(239) 768-0600
(Address and Telephone Number of Principal Executive Offices and Principal Place of Business)	(Primary Standard Industrial Classification Code Number)	(Name, Address and Telephone Number of Agent for Service)

With a copy to:

Clayton E. Parker, Esq.

Kirkpatrick & Lockhart Preston Gates Ellis LLP

200 S. Biscayne Boulevard, Suite 3900

Miami, Florida 33131

Telephone: (305) 539-3300

Facsimile: (305) 358-7095

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. /X/

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /_/

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /_/

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /_/

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer /__/	Accelerated filer /__/
Non-accelerated filer /__/ (Do not check if a smaller reporting company)	Smaller reporting company /X/

CALCULATION OF REGISTRATION FEE

Proposed Maximum
Title Of Each Class Of Securities To Be Registered	Amount To Be Registered	Proposed Maximum Offering Price Per Share(1)		Aggregate Offering Price(1)		Amount Of Registration Fee
Common Stock, par value $0.001 per share	7,000,000 shares	$	1.30	$	9,100,000	$	280.60	(2)
TOTAL	7,000,000 shares	$	1.30	$	9,100,000	$	280.60

(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933. For the purposes of this table, we have used the average of the closing bid and asked prices as of a recent date.

(2)	Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

MI-268286 v5 0437575-00201

PROSPECTUS

NEOGENOMICS, INC.

7,000,000 shares of Common Stock

This prospectus relates to the sale of up to 7,000,000 shares of the Common Stock, par value $0.001 per share (“Common Stock”) of NeoGenomics, Inc. (referred to individually as the “Parent Company” or, collectively with all of its subsidiaries, as the “Company”, “NeoGenomics”, or “we”, “us”, or “our”) by certain persons who are stockholders of the Parent Company. The selling stockholders consist of:

Those Investors set forth in the section herein entitled “Selling Stockholders” who intend to sell up to 2,666,667 shares of Common Stock previously issued and sold by the Parent Company to the Investors for a purchase price equal to $1.50 per share during the period from May 31, 2007 through June 6, 2007 pursuant to a private equity transaction (the “Private Placement”). The Investors received registration rights with their shares and therefore, such shares are being registered hereunder;

Those Investors set forth in the section herein entitled “Selling Stockholders” who intend to sell up to 1,500,000 shares of Common Stock previously sold by Aspen Select Healthcare, L.P. (“Aspen”) to the Investors during the period from June 1, 2007 through June 5, 2007 in connection with the Private Placement. The Investors received registration rights with their shares and therefore, such shares are being registered hereunder;

Noble International Investments, Inc. (“Noble”) which intends to sell up to 98,417 shares of Common Stock underlying warrants previously issued by the Parent Company to Noble on June 5, 2007 in consideration for Noble’s services as placement agent in connection with the Private Placement. Noble received piggy back registration rights with its shares and therefore, such shares are being registered hereunder;

Dr. Michael Dent, Chairman of the Board who intends to sell up to 345,671 shares of Common Stock previously issued and sold by the Company to Michael Dent as founder shares;

Aspen, which intends to sell up to 1,889,245 shares of Common Stock previously issued and sold by the Company to Aspen on April 15, 2003. Aspen received registration rights with respect to these 1,889,245 shares and therefore, such shares are being registered hereunder; and

Lewis Opportunity Fund and LAM Opportunity Fund are managed by Lewis Asset Management (“LAM”), which intends to sell up to 500,000 shares of Common Stock previously issued to LAM by the Company on June 6, 2007 upon conversion of certain warrants previously sold by Aspen to LAM on June 6, 2007. The Company issued these shares at an exercise price of $0.26 per share and received gross proceeds equal to $130,000. LAM received registration rights with its warrants and therefore, such shares underlying such warrants are being registered hereunder.

Please refer to “Selling Stockholders” beginning on page 22.

The Company is not selling any shares of Common Stock in this offering and therefore will not receive any proceeds from this offering. All costs associated with this registration will be borne by the Company.

Shares of Common Stock are being offered for sale by the selling stockholders at prices established on the Over-the-Counter Bulletin Board (the “OTCBB”) during the term of this offering. On May 30, 2008, the last reported sale price of our Common Stock was $1.30 per share. Our Common Stock is quoted on the OTCBB under the symbol “NGMN.OB”. These prices will fluctuate based on the demand for the shares of our Common Stock.

Brokers or dealers effecting transactions in these shares should confirm that the shares are registered under the applicable state law or that an exemption from registration is available.

These securities are speculative and involve a high degree of risk.

Please refer to “Risk Factors” beginning on page 10.

The information in this prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”) is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

No underwriters or persons have been engaged to facilitate the sale of shares of our Common Stock in this offering. None of the proceeds from the sale of stock by the selling stockholders will be placed in escrow, trust or any similar account.

The SEC and state securities regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is________, 2008.

TABLE OF CONTENTS

PROSPECTUS SUMMARY	1
THE OFFERING	4
SUMMARY CONSOLIDATED FINANCIAL INFORMATION	6
RISK FACTORS	10
FORWARD-LOOKING STATEMENTS	20
SELLING STOCKHOLDERS	21
USE OF PROCEEDS	25
PLAN OF DISTRIBUTION	26
MANAGEMNET'S DISCUSSION AND ANALYSIS OR PALN OF OPERATION	27
DESCRIPTION OF BUSINESS	37
MANAGEMENT	46
PRINCIPAL STOCKHOLDERS	53
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER STOCKHOLDER MATTERS	56
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	59
DESCRIPTION OF CAPITAL STOCK	61
LEGAL MATTERS	63
AVAILABLE INFORMATION	63
FINANCIAL STATEMENTS OF NEOGENOMICS, INC	F-i
PART II	II-1
SIGNATURES	II-8

PROSPECTUS SUMMARY

The following is only a summary of the information, Financial Statements and the Notes thereto included in this prospectus. You should read the entire prospectus carefully, including “Risk Factors” and our Financial Statements and the Notes thereto before making any investment decision.

Our Company

NeoGenomics operates a network of cancer-focused testing laboratories. The Company’s growing network of laboratories currently offers the following types of testing services to pathologists, oncologists, urologists, hospitals, and other laboratories throughout the United States:

a) cytogenetics testing, which analyzes human chromosomes;

Fluorescence In-Situ Hybridization (FISH) testing, which analyzes abnormalities at the chromosomal and gene levels;

flow cytometry testing, which analyzes gene expression of specific markers inside cells and on cell surfaces; and

molecular testing which involves analysis of DNA and RNA to diagnose and predict the clinical significance of various genetic sequence disorders.

All of these testing services are widely utilized in the diagnosis and prognosis of various types of cancer.

The medical testing laboratory market can be broken down into three primary segments:

clinical lab testing,

anatomic pathology testing, and

genetic and molecular testing.

Clinical laboratories are typically engaged in high volume, highly automated, lower complexity tests on easily procured specimens such as blood and urine. Clinical lab tests often involve testing of a less urgent nature, for example, cholesterol testing and testing associated with routine physical exams.

Anatomic pathology (“AP”) testing involves evaluation of tissue, as in surgical pathology, or cells as in cytopathology. The most widely performed AP procedures include the preparation and interpretation of pap smears, skin biopsies, and tissue biopsies.

Genetic and molecular testing typically involves analyzing chromosomes, genes or base pairs of DNA or RNA for abnormalities. New tests are being developed at an accelerated pace, thus this market niche continues to expand rapidly. Genetic and molecular testing requires highly specialized equipment and credentialed individuals (typically MD or PhD level) to certify results and typically yields the highest average revenue per test of the three market segments. The estimated size of this market is $4-$5 Billion and growing at an annual rate of greater than 25%.

Our primary focus is to provide high complexity laboratory testing for the community-based pathology and oncology marketplace. Within these key market segments, we currently provide our services to pathologists and oncologists in the United States that perform bone marrow and/or peripheral blood sampling for the diagnosis of blood and lymphoid tumors (leukemias and lymphomas) and archival tissue referral for analysis of solid tumors such as breast cancer. A secondary strategic focus targets community-based urologists due to the availability of UroVysion®, a FISH-based test for the initial diagnosis of bladder cancer and early detection of recurrent disease. We focus on community-based practitioners for two reasons: First, academic pathologists and associated clinicians tend to have their testing needs met within the confines of their university affiliation. Secondly, most of the cancer care in the United States is administered by community based practitioners, not in academic centers, due to ease of local access. Moreover, within the community-based pathologist

segment it is not our intent to willingly compete with our customers for testing services that they may seek to perform themselves. Fee-for-service pathologists for example, derive a significant portion of their annual revenue from the interpretation of biopsy specimens. Unlike other larger laboratories, which strive to perform 100% of such testing services themselves, we do not intend to compete with our customers for such specimens. Rather, our high complexity cancer testing focus is a natural extension of and complementary to many of the services that our community-based customers often perform within their own practices. As such, we believe our relationship as a non-competitive consultant, empowers these physicians to expand their testing breadth and provide a menu of services that matches or exceeds the level of service found in academic centers of excellence around the country.

We continue to make progress growing our testing volumes and revenue beyond our historically focused effort in Florida due to our expanding field sales footprint. As of May 15, 2008, NeoGenomics’ sales and marketing organization totaled fourteen individuals, and we have received business from twenty-six states throughout the country. Recent, key hires included various territory business managers (sales representatives) in the Northeastern, Southeastern, and Western states. We intend to continue to add additional sales and marketing personnel throughout FY 2008. As more sales representatives are added, we believe that the base of our business outside of Florida will continue to grow and ultimately eclipse that which is generated within the state.

We are successfully competing in the marketplace based on the quality and comprehensiveness of our test results, and our innovative flexible levels of service, industry-leading turn-around times, regionalization of laboratory operations and ability to provide after-test support to those physicians requesting consultation.

2007 saw the refinement of our industry leading NeoFISHTM technical component-only FISH service offering. Upon the suggestion of our installed customer base, we made numerous usability and technical enhancements throughout last year. The result has been a product line for NeoGenomics that continues to resonate very well with our client pathologists. Utilizing NeoFISHTM, such clients are empowered to extend the outreach efforts of their practices and exert a high level of sign out control over their referral work in a manner that was previously unobtainable.

NeoFLOWTM tech-only flow cytometry was launched as a companion service to NeoFISHTM in late 2007. While not a first to market product line for NeoGenomics, the significant breadth of the service offering together with high usability scores from early customers indicate NeoFLOWTM will be a key growth driver in 2008. Moreover, the combination of NeoFLOWTM and NeoFISHTM serves to strengthen the market differentiation of each product line for NeoGenomics and allows us to compete more favorably against larger, more entrenched competitors in our testing niche.

We also recently increased our professional level staffing for global requisitions requiring interpretation in 2007. We currently employ three full-time MDs as our medical directors and pathologists, two PhDs as our scientific directors and cytogeneticists, and two part-time MDs acting as consultants and backup pathologists for case sign out purposes. We have plans to hire several more hematopathologists in 2008 as our product mix continues to expand beyond tech-only services and more sales emphasis is focused on our ability to issue consolidated reporting with case interpretation under our Genetic Pathology Solutions (GPSTM) product line.

We believe NeoGenomics average 3-5 day turn-around time for our cytogenetics services continues to remain an industry-leading benchmark for national laboratories. The timeliness of results continues to increase the usage patterns of cytogenetics and act as a driver for other add-on testing requests by our referring physicians. Based on anecdotal information, we believe that typical cytogenetics labs have 7-14 day turn-around times on average with some labs running as high as twenty-one days. Traditionally, longer turn-around times for cytogenetics tests have resulted in fewer FISH and other molecular tests being ordered since there is an increased chance that the test results will not be returned within an acceptable diagnostic window when other adjunctive diagnostic test results are available. We believe our turn-around times result in our referring physicians requesting more of our testing services in order to augment or confirm other diagnostic tests, thereby giving us a significant competitive advantage in marketing our services against those of other competing laboratories.

In 2007 we continued an aggressive campaign to regionalize our laboratory operations around the country to be closer to our customers. High complexity laboratories within the cancer testing niche have frequently operated a core facility on one or both coasts to service the needs of their customers around the country. Informal surveys of customers and prospects uncovered a desire to do business with a laboratory with national breadth but with a more local presence. In such a scenario, specimen integrity, turnaround-time of results, client service support, and interaction with our medical staff are all enhanced. In 2007, NeoGenomics operated three laboratory locations in Fort Myers, FL; Irvine, CA; and Nashville TN, each of which has received the appropriate state, Clinical Laboratory Improvement Amendments (CLIA), and College of American Pathologists (CAP) licenses and accreditations. As situations dictate and opportunities arise, we will continue to

develop and open new laboratories, seamlessly linked together by our optimized Laboratory Information System (LIS), to better meet the regionalized needs of our customers.

2007 also brought progress in the NeoGenomics Contract Research Organization (“CRO”) division based at our Irvine, CA facility. This division was created to take advantage of our core competencies in genetic and molecular high complexity testing and acts as a vehicle to compete for research projects and clinical trial support contracts in the biotechnology and pharmaceutical industries. The CRO division will also act as a development conduit for the validation of new tests which can then be transferred to our clinical laboratories and be offered to our clients. We envision the CRO as a way to infuse some intellectual property into the mix of our services and, in time, create a more “vertically integrated” laboratory that can potentially offer additional clinical services of a more proprietary nature. 2007 brought the first revenue to NeoGenomics’ CRO division. This initial revenue stream was small due to the size of contracts closed. In 2008, we hope to expand on our CRO revenue stream with more and larger contracts.

As NeoGenomics grows, we anticipate offering additional tests that broaden our focus from genetic and molecular testing to more traditional types of anatomic pathology testing (i.e. immunohistochemistry) that are complementary to our current test offerings. At no time do we expect to intentionally compete with fee-for-service pathologists for services of this type, and Company sales efforts will operate under a strict “right of first refusal” philosophy that supports rather than undercuts the practice of community-based pathology. We believe that by adding additional types of tests to our product offering we will be able to capture increases in our testing volumes through our existing customer base as well as more easily attract new customers via the ability to package our testing services more appropriately to the needs of the market.

The above market strategy continues to bear fruit for the Company, resulting in strong year over year growth of 78% in FY 2007 versus FY 2006. Our average revenue/requisition in FY 2007 was approximately $702, which was an increase of approximately 4% from FY 2006. Our average revenue/test in FY 2007 was approximately $548, which was an increase of approximately 9% over FY 2006. FY 2007 saw a slight erosion of average tests per requisition due to the overwhelming success of our UroVysion (bladder cancer) product line, which tends to be a singly ordered test request. New sales hires and a new focus on global workups with interpretation and our integrated GPS product line should allow us to increase our average revenue per customer requisition in 2008.

	FY 2007		FY 2006		% Inc (Dec)

Customer Requisitions Received (Cases)		16,385		9,563		71.3	%
Number of Tests Performed		20,998		12,838		63.6	%
Average Number of Tests/Requisition		1.28		1.34		(4.5	%)

Total Testing Revenue	$	11,504,725	$	6,475,996		77.7	%
Average Revenue/Requisition	$	702.15	$	677.19		3.7	%
Average Revenue/Test	$	547.90	$	504.44		8.6	%

We believe this bundled approach to testing represents a clinically sound practice that is medically valid. Within the subspecialty field of hematopathology, such a bundled approach to the diagnosis and prognosis of blood and lymph node diseases has become the standard of care throughout the country. In addition, as the average number of tests performed per requisition increases, we believe this should drive increases in our revenue and afford the Company significant synergies and efficiencies in our operations and sales and marketing activities.

About Us

Our principal executive offices are located at 12701 Commonwealth Drive, Suite 5, Fort Myers, Florida 33913. Our telephone number is (239) 768-0600. Our website can be accessed at www.neogenomics.org.

THE OFFERING

Noble International Investments, Inc. (“Noble”) which intends to sell up to 98,417 shares of Common Stock underlying warrants previously issued by the Parent Company to Noble on June 5, 2007 in consideration for Noble’s services as placement agent in connection with the Private Placement. Noble received piggy-back registration rights with its shares and therefore, such shares are being registered hereunder;

Dr. Michael Dent, Chairman of the Board who intends to sell up to 345,671 shares of Common Stock previously issued and sold by the Company to Michael Dent as founder shares;

Please refer to “Selling Stockholders” beginning on page 22.

The Company engaged Noble, an unaffiliated registered broker-dealer, to advise us as our placement agent in connection with the Private Placement pursuant to that certain Letter Agreement, dated May 21, 2007, by and between the Parent Company and Noble. In consideration for its services, Noble received (a) warrants to purchase 98,417 shares of our Common Stock, which warrants have a five (5) year term, an exercise price equal to $1.50 per share, cashless exercise provisions, customary anti-dilution provisions and the same other terms, conditions, rights and preferences as those shares sold to the Investors in the Private Placement, and (b) a cash fee equal to five percent (5%) of the gross proceeds from each sale made to the Investors introduced by Noble to the Company, or $147,625.

We also engaged Aspen Capital Advisors, a Company affiliated with one of our directors, to assist us in this offering. In consideration for its services, Aspen Capital Advisors received: (a) warrants to purchase 250,000 shares of our Common Stock, which warrants have a five (5) year term, an exercise price equal to $1.50 per share, cashless exercise provisions, customary anti-dilution provisions and the same other terms, conditions, rights and preferences as those shares sold to the Investors in the Private Placement, and (b) a cash fee equal to $52,375.

On August 31, 2007, the Company issued warrants to purchase 533,334 shares of it’s Common Stock to the investors who purchased shares in the private placement. Such warrants have an exercise price of $1.50 per share and are exercisable for a period of two years. Such warrants also have a provision for piggyback registration rights in the first year and demand registration rights in the second year. No shares underlying are being registered hereunder.

Common Stock Offered	7,000,000 shares by selling stockholders
Offering Price	Market price
Common Stock Currently Outstanding	31,365,021 shares as of May 30, 2008
Use of Proceeds	We will not receive any proceeds of the shares offered by the selling stockholders. See “Use of Proceeds”.
Risk Factors	The securities offered hereby involve a high degree of risk. See “Risk Factors”.
Over-the-Counter Bulletin Board Symbol	NGNM.OB

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The Summary Consolidated Financial Information set forth below was excerpted from the Company’s unaudited Quarterly Report on Form 10-Q for the three months ended March 31, 2008 and 2007, as filed with the SEC.

Statement of Operations Data

	For the Three Months Ended
	March 31,			March 31,
	2008			2007

Net Revenue	$	4,162,762		$	2,242,661
Cost of Revenue		1,858,474			936,734
Gross Profit		2,304,288			1,305,927
Other Operating Expenses:
General and administrative		2,514,555			1,426,548
Interest expense, net		55,096			98,924
Total Operating Expenses		2,569,651			1,525,472
Net Loss	$	(265,363	)	$	(219,545	)
Net Loss Per Share - Basic And Fully Diluted	$	(0.01	)	$	(0.01	)
Weighted Average Number Of Shares Outstanding – Basic and Fully Diluted	$	31,400,947		$	27,371,233

Balance Sheet Data


	March 31,			March 31,
	2008			2007

Current Assets
Cash and cash equivalents	$	330,358		$	575,393
Accounts receivable (net of allowance for doubtful accounts of $390,275 and $126,363, respectively)		2,937,905			1,986,229
Inventories		245,986			155,190
Other current assets		426,739			106,039
Total current assets		3,940,988			2,822,851
Property and equipment (net of accumulated depreciation of $1,018,446 and $862,030, respectively)		2,032,537			1,409,381
Other assets		248,374			39,791
Total Assets	$	6,221,899		$	4,272,023

Liabilities And Stockholders’ Equity:
Current Liabilities
Accounts payable	$	1,609,775		$	761,071
Accrued compensation		-			162,672
Due to affiliates		-			1,674,186
Accrued expenses and other liabilities		1,280,212			132,030
Short-term portion of equipment capital leases		288,415			142,318
Total current liabilities		3,178,402			2,872,277
Long Term Liabilities
Long-term portion of equipment capital leases		890,468			610,056
Total Liabilities		4,068,870			3,482,333

Stockholders’ Equity
Common stock, $.001 par value, (100,000,000 shares authorized; 31,415,021 and 31,391,660 shares issued and outstanding, respectively)		31,407			27,698
Additional paid-in capital		16,917,216			12,342,983
Deferred stock compensation		-			(211,388	)
Accumulated deficit		(14,795,594	)		(11,369,603	)
Total stockholders’ equity		2,153,029			789,690
Total Liabilities and Stockholders’ Equity	$	6,221,899		$	4,272,023

The Summary Consolidated Financial Information set forth below was excerpted from the Company’s Annual Reports on Form 10-KSB for the periods ended December 31, 2007 and 2006, as filed with the SEC.

Statement of Operations Data

		For the Periods Ended December 31,
		2007		2006

Net Revenue	$	11,504,725	$	6,475,996
Cost of Revenue		5,522,775		2,759,190
Gross Profit		5,981,950		3,716,806

Other Operating Expense:
General and Administrative		9,122,922		3,576,812
Income / (Loss) from Operations		(3,140,972)		139,994

Other Income / (Expense):
Other Income		24,256		55,.970
Interest expense		(263,456)		(325,625)
Other income / (expense) – net		(239,200)		(269,655)

Net Loss	$	(3,380,172)	$	(129,661)

Net Loss Per Share – Basic and Diluted	$	(0.11)	$	(0.0)

Weighted Average Number of Shares Outstanding – Basic
Diluted		29,764,289		26,166,031

Balance Sheet Data


	December 31, 2007			December 31, 2006

Assets:
Cash and cash equivalents	$	210,573		$	126,266
Accounts receivable (net of allowance for doubtful accounts of $414,548 and 103,463 for December 31, 2007 and 2006, respectively)		3,236,751			1,549,758
Inventories		304,750			117,362
Other current assets		400,168			102,172
Total current assets		4,152,242			1,895,558

Property and equipment (net of accumulated depreciation of $862,030)		2,108,083			1,202,487
Other assets		260,575			33,903
Total Assets	$	6,520,900		$	3,131,948

Liabilities & Stockholders’ Equity:
Current Liabilities
Account payable	$	1,799,159		$	697,754
Accrued compensation		370,496			133,490
Accrued expenses and other liabilities		574,084			67,098
Legal contingency		375,000			-
Due to affiliates (net of discount of $39,285)		-			1,635,715
Short-term portion of equipment capital leases		242,966			94,430
Total current liabilities	$	3,361,705		$	2,628,487

Long-Term Liabilities
Long-term portion of equipment capital leases		837,081			448,947

Total Liabilities:		4,198,786			3,077,434
Commitments and contingencies

Stockholders’ Equity:
Common Stock, $0.01 par value, (100,000,000 shares authorized; and 31,391,660 and 27,061,476 shares issued and outstanding at December 31, 2007 and 2006, respectively)		31,391			27,061-
Additional paid-in capital		16,820,954			11,300,135
Deferred stock compensation		-			(122,623	)
Accumulated deficit		(14,530,231	)		(11,150,059	)
Total stockholders’ equity	$	2,322,114		$	54,514

Total Liabilities and Stockholders’ Equity	$	6,520,900		$	3,131,948

RISK FACTORS

We are subject to various risks that may materially harm our business, financial condition and results of operations. An investor should carefully consider the risks and uncertainties described below and the other information in this filing before deciding to purchase our Common Stock. If any of these risks or uncertainties actually occurs, our business, financial condition or operating results could be materially harmed. In that case, the trading price of our Common Stock could decline or we may be forced to cease operations.

Risks Related To Our Business

We Have A Limited Operating History Upon Which You Can Evaluate Our Business And Unforeseen Risks May Harm The Success Of Our Business

We commenced revenue operations in 2002 and are just beginning to generate meaningful revenue. Accordingly, we have a limited operating history upon which an evaluation of us and our prospects can be based. We and our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in the rapidly evolving market for healthcare and medical laboratory services. To address these risks, we must, among other things, respond to competitive developments, attract, retain and motivate qualified personnel, implement and successfully execute our sales strategy, develop and market additional services, and upgrade our technological and physical infrastructure in order to scale our revenues. We may not be successful in addressing such risks. Our limited operating history makes the prediction of future results of operations difficult or impossible.

We May Not Be Able To Implement Our Business Strategies Which Could Impair Our Ability to Continue Operations

Implementation of our business strategies will depend in large part on our ability to (i) attract and maintain a significant number of customers; (ii) effectively provide acceptable products and services to our customers; (iii) obtain adequate financing on favorable terms to fund our business strategies; (iv) maintain appropriate procedures, policies, and systems; (v) hire, train, and retain skilled employees; (vi) continue to operate with increasing competition in the medical laboratory industry; (vii) establish, develop and maintain name recognition; and (viii) establish and maintain beneficial relationships with third-party insurance providers and other third party payors. Our inability to obtain or maintain any or all these factors could impair our ability to implement our business strategies successfully, which could have material adverse effects on our results of operations and financial condition.

We May Be Unsuccessful In Managing Our Growth Which Could Prevent the Company From Becoming Profitable

Our recent growth has placed, and is expected to continue to place, a significant strain on our managerial, operational and financial resources. To manage our potential growth, we must continue to implement and improve our operational and financial systems and to expand, train and manage our employee base. We may not be able to effectively manage the expansion of our operations and our systems, procedures or controls may not be adequate to support our operations. Our management may not be able to achieve the rapid execution necessary to fully exploit the market opportunity for our products and services. Any inability to manage growth could have a material adverse effect on our business, results of operations, potential profitability and financial condition.

Part of our business strategy may be to acquire assets or other companies that will complement our existing business. At this time, we are unable to predict whether or when any material transaction will be completed should negotiations commence. If we proceed with any such transaction, we may not effectively integrate the acquired operations with our own operations. We may also seek to finance any such acquisition by debt financings or issuances of equity securities and such financing may not be available on acceptable terms or at all.

We May Incur Greater Costs Than Anticipated, Which Could Result in Sustained Losses

We used reasonable efforts to assess and predict the expenses necessary to pursue our business plan. However, implementing our business plan may require more employees, capital equipment, supplies or other expenditure items than management has predicted. Similarly, the cost of compensating additional management, employees and consultants or other operating costs may be more than we estimate, which could result in sustained losses.

We May Face Fluctuations in Results of Operations Which Could Negatively Affect Our Business Operations and We are Subject to Seasonality in our Business

As a result of our limited operating history and the relatively limited information available on our competitors, we may not have sufficient internal or industry-based historical financial data upon which to calculate anticipated operating expenses. Management expects that our results of operations may also fluctuate significantly in the future as a result of a variety of factors, including, but not limited to: (i) the continued rate of growth, usage and acceptance of our products and services; (ii) demand for our products and services; (iii) the introduction and acceptance of new or enhanced products or services by us or by competitors; (iv) our ability to anticipate and effectively adapt to developing markets and to rapidly changing technologies; (v) our ability to attract, retain and motivate qualified personnel; (vi) the initiation, renewal or expiration of significant contracts with our major clients; (vii) pricing changes by us, our suppliers or our competitors; (viii) seasonality; and (ix) general economic conditions and other factors. Accordingly, future sales and operating results are difficult to forecast. Our expenses are based in part on our expectations as to future revenues and to a significant extent are relatively fixed, at least in the short-term. We may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in relation to our expectations would have an immediate adverse impact on our business, results of operations and financial condition. In addition, we may determine from time to time to make certain pricing or marketing decisions or acquisitions that could have a short-term material adverse affect on our business, results of operations and financial condition and may not result in the long-term benefits intended. Furthermore, in Florida, currently our primary referral market for lab testing services, a meaningful percentage of the population, returns to homes in the Northern U.S. to avoid the hot summer months. This may result in seasonality in our business. Because of all of the foregoing factors, our operating results could be less than the expectations of investors in future periods.

We Substantially Depend Upon Third Parties for Payment of Services, Which Could Have A Material Adverse Affect On Our Cash Flows And Results Of Operations

The Company is a clinical medical laboratory that provides medical testing services to doctors, hospitals, and other laboratories on patient specimens that are sent to the Company. In the case of most specimen referrals that are received for patients that are not in-patients at a hospital or institution or otherwise sent by another reference laboratory, the Company generally has to bill the patient’s insurance company or a government program for its services. As such it relies on the cooperation of numerous third party payors, including but not limited to Medicare, Medicaid and various insurance companies, in order to get paid for performing services on behalf of the Company’s clients. Wherever possible, the amount of such third party payments is governed by contractual relationships in cases where the Company is a participating provider for a specified insurance company or by established government reimbursement rates in cases where the Company is an approved provider for a government program such as Medicare. However, the Company does not have a contractual relationship with many of the insurance companies with whom it deals, nor is it necessarily able to become an approved provider for all government programs. In such cases, the Company is deemed to be a non-participating provider and there is no contractual assurance that the Company is able to collect the amounts billed to such insurance companies or government programs. Currently, the Company is not a participating provider with the majority of the insurance companies it bills for its services. Until such time as the Company becomes a participating provider with such insurance companies, there can be no contractual assurance that the Company will be paid for the services it bills to such insurance companies, and such third parties may change their reimbursement policies for non-participating providers in a manner that may have a material adverse effect on the Company’s cash flow or results of operations.

Our Business Is Subject To Rapid Scientific Change, Which Could Have A Material Adverse Affect On Our Business, Results of Operations And Financial Condition

The market for genetic and molecular testing services is characterized by rapid scientific developments, evolving industry standards and customer demands, and frequent new product introductions and enhancements. Our future success will depend in significant part on our ability to continually improve our offerings in response to both evolving demands of the marketplace and competitive service offerings, and we may be unsuccessful in doing so.

The Market For Our Services Is Highly Competitive, Which Could Have A Material Adverse Affect On Our Business, Results Of Operations And Financial Condition

The market for genetic and molecular testing services is highly competitive and competition is expected to continue to increase. We compete with other commercial medical laboratories in addition to the in-house laboratories of many major hospitals. Many of our existing competitors have significantly greater financial, human, technical and marketing resources than we do. Our competitors may develop products and services that are superior to ours or that achieve greater market acceptance than our offerings. We may not be able to compete successfully against current and future sources of competition and in such case, this may have a material adverse effect on our business, results of operations and financial condition.

We Face The Risk of Capacity Constraints, Which Could Have A Material Adverse Affect On Our Business, Results Of Operations And Financial Condition

We compete in the market place primarily on three factors: a) the quality and accuracy of our test results; b) the speed or turn-around times of our testing services; and c) our ability to provide after-test support to those physicians requesting consultation. Any unforeseen increase in the volume of customers could strain the capacity of our personnel and systems, which could lead to inaccurate test results, unacceptable turn-around times, or customer service failures. In addition, as the number of customers and cases increases, our products, services, and infrastructure may not be able to scale accordingly. Any failure to handle higher volume of requests for our products and services could lead to the loss of established customers and have a material adverse effect on our business, results of operations and financial condition.

If we produce inaccurate test results, our customers may choose not to use us in the future. This could severely harm our business, results of operations and financial condition. In addition, based on the importance of the subject matter of our tests, inaccurate results could result in improper treatment of patients, and potential liability for us.

We May Fail to Protect Our Facilities, Which Could Have A Material Adverse Affect On Our Business, Results Of Operations And Financial Condition

The Company’s operations are dependent in part upon its ability to protect its laboratory operations against physical damage from fire, floods, hurricanes, power loss, telecommunications failures, break-ins and similar events. The Company does not presently have an emergency back-up generator in place at its Fort Myers, Fl, Nashville, TN and Irvine, CA laboratory locations that can mitigate to some extent the effects of a prolonged power outage. The occurrence of any of these events could result in interruptions, delays or cessations in service to Customers, which could have a material adverse effect on our business, results of operations and financial condition.

The Steps Taken By The Company To Protect Its Proprietary Rights May Not Be Adequate, Which Could Result In Infringement Or Misappropriation By Third-Parties

We regard our copyrights, trademarks, trade secrets and similar intellectual property as critical to our success, and we rely upon trademark and copyright law, trade secret protection and confidentiality and/or license agreements with our employees, customers, partners and others to protect our proprietary rights. The steps taken by us to protect our proprietary rights may not be adequate or third parties may infringe or misappropriate our copyrights, trademarks, trade secrets and similar proprietary rights. In addition, other parties may assert infringement claims against us.

We Are Dependent On Key Personnel And Need To Hire Additional Qualified Personnel In Order For Our Business To Succeed

Our performance is substantially dependent on the performance of our senior management and key technical personnel. In particular, our success depends substantially on the continued efforts of our senior management team, which currently is composed of a small number of individuals. The loss of the services of any of our executive officers, our laboratory director or other key employees could have a material adverse effect on our business, results of operations and our financial condition.

Our future success also depends on our continuing ability to attract and retain highly qualified technical and managerial personnel. Competition for such personnel is intense and we may not be able to retain our key managerial and technical employees or may not be able to attract and retain additional highly qualified technical and managerial personnel in the future. The inability to attract and retain the necessary technical and managerial personnel could have a material adverse effect upon our business, results of operations and financial condition.

The Failure to Obtain Necessary Additional Capital to Finance Growth and Capital Requirements, Could Adversely Affect Our Business, Financial Condition and Results of Operations

We may seek to exploit business opportunities that require more capital than what is currently planned. We may not be able to raise such capital on favorable terms or at all. If we are unable to obtain such additional capital, We may be required to reduce the scope of our anticipated expansion, which could adversely affect our business, financial condition and results of operations.

Our Net Revenue Will Be Diminished If Payors Do Not Adequately Cover Or Reimburse Our Services

There has been and will continue to be significant efforts by both federal and state agencies to reduce costs in government healthcare programs and otherwise implement government control of healthcare costs. In addition, increasing emphasis on managed care in the U.S. may continue to put pressure on the pricing of healthcare services. Uncertainty exists as to the coverage and reimbursement status of new applications or services. Third party payors, including governmental payors such as Medicare and private payors, are scrutinizing new medical products and services and may not cover or may limit coverage and the level of reimbursement for our services. Third party insurance coverage may not be available to patients for any of our existing assays or assays we discover and develop. However, a substantial portion of the testing for which we bill our hospital and laboratory clients is ultimately paid by third party payors. Any pricing pressure exerted by these third party payors on our customers may, in turn, be exerted by our customers on us. If government and other third party payors do not provide adequate coverage and reimbursement for our assays, our operating results, cash flows or financial condition may decline.

Third Party Billing Is Extremely Complicated And Will Result In Significant Additional Costs To Us

Billing for laboratory services is extremely complicated. The customer refers the tests; the payor is the party that pays for the tests, and the two are not always the same. Depending on the billing arrangement and applicable law, we need to bill various payors, such as patients, insurance companies, Medicare, Medicaid, doctors and employer groups, all of which have different billing requirements. Additionally, our billing relationships require us to undertake internal audits to evaluate compliance with applicable laws and regulations as well as internal compliance policies and procedures. Insurance companies also impose routine external audits to evaluate payments made. This adds further complexity to the billing process.

Among many other factors complicating billing are:

pricing differences between our fee schedules and the reimbursement rates of the payors;

disputes with payors as to which party is responsible for payment; and

disparity in coverage and information requirements among various carriers.

We incur significant additional costs as a result of our participation in the Medicare and Medicaid programs, as billing and reimbursement for clinical laboratory testing are subject to considerable and complex federal and state regulations. The additional costs we expect to incur include those related to: (1) complexity added to our billing processes; (2) training and education of our employees and customers; (3) implementing compliance procedures and oversight; (4) collections and legal costs; and (5) costs associated with, among other factors, challenging coverage and payment denials and providing patients with information regarding claims processing and services, such as advanced beneficiary notices.

Our Operations are Subject to Strict Laws Prohibiting Fraudulent Billing and Other Abuse, and our Failure to Comply with Such Laws could Result in Substantial Penalties

Of particular importance to our operations are federal and state laws prohibiting fraudulent billing and providing for the recovery of non-fraudulent overpayments, as a large number of laboratories have been forced by the federal and state governments, as well as by private payors, to enter into substantial settlements under these laws. In particular, if an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three (3) times the actual damages sustained by the government, plus civil penalties of between $5,500 to $11,000 for each separate false claim. There are many potential bases for liability under the federal False Claims Act. Liability arises, primarily, when an entity knowingly submits, or causes another to submit, a false claim for reimbursement to the federal government. Submitting a claim with reckless disregard or deliberate ignorance of its truth or falsity could result in substantial civil liability. A trend affecting the healthcare industry is the increased use of the federal False Claims Act and, in particular, actions under the False Claims

Act’s “whistleblower” or “qui tam” provisions to challenge providers and suppliers. Those provisions allow a private individual to bring actions on behalf of the government alleging that the defendant has submitted a fraudulent claim for payment to the federal government. The government must decide whether to intervene in the lawsuit and to become the primary prosecutor. If it declines to do so, the individual may choose to pursue the case alone, although the government must be kept apprised of the progress of the lawsuit. Whether or not the federal government intervenes in the case, it will receive the majority of any recovery. In addition, various states have enacted laws modeled after the federal False Claims Act.

Government investigations of clinical laboratories have been ongoing for a number of years and are expected to continue in the future. Written “corporate compliance” programs to actively monitor compliance with fraud laws and other regulatory requirements are recommended by the Department of Health and Human Services’ Office of the Inspector General.

The Failure to Comply With Significant Government Regulation and Laboratory Operations May Subject the Company to Liability, Penalties or Limitation of Operations

As discussed in the Government Regulation section of our business description, we are subject to extensive state and federal regulatory oversight. Our laboratory locations may not pass inspections conducted to ensure compliance with CLIA `88 or with any other applicable licensure or certification laws. The sanctions for failure to comply with CLIA `88 or state licensure requirements might include the inability to perform services for compensation or the suspension, revocation or limitation of the laboratory location’s CLIA `88 certificate or state license, as well as civil and/or criminal penalties. In addition, any new legislation or regulation or the application of existing laws and regulations in ways that we have not anticipated could have a material adverse effect on the Company’s business, results of operations and financial condition.

Existing federal laws governing Medicare and Medicaid, as well as some other state and federal laws, also regulate certain aspects of the relationship between healthcare providers, including clinical and anatomic laboratories, and their referral sources, including physicians, hospitals and other laboratories. Certain provisions of these laws, known as the "anti-kickback law" and the “Stark Laws”, contain extremely broad proscriptions. Violation of these laws may result in criminal penalties, exclusion from Medicare and Medicaid, and significant civil monetary penalties. We will seek to structure our arrangements with physicians and other customers to be in compliance with the anti-kickback, Stark and state laws, and to keep up-to-date on developments concerning their application by various means, including consultation with legal counsel. However, we are unable to predict how these laws will be applied in the future and the arrangements into which we enter may become subject to scrutiny thereunder.

Furthermore, the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and other state laws contains provisions that affect the handling of claims and other patient information that are, or have been, transmitted electronically and regulate the general disclosure of patient records and patient health information. These provisions, which address security and confidentiality of patient information as well as the administrative aspects of claims handling, have very broad applicability and they specifically apply to healthcare providers, which include physicians and clinical laboratories. Although we believe we have complied with the Standards, Security and Privacy rules under HIPAA and state laws, an audit of our procedures and systems could find deficiencies. Such deficiencies, if found, could have a material adverse effect on the Company’s business, results of operations and financial condition and subject us to liability.

We Are Subject to Security Risks Which Could Harm Our Operations

Despite the implementation of various security measures by us, our infrastructure is vulnerable to computer viruses, break-ins and similar disruptive problems caused by our customers or others. Computer viruses, break-ins or other security problems could lead to interruption, delays or cessation in service to our customers. Further, such break-ins whether electronic or physical could also potentially jeopardize the security of confidential information stored in our computer systems of our customers and other parties connected through us, which may deter potential customers and give rise to uncertain liability to parties whose security or privacy has been infringed. A significant security breach could result in loss of customers, damage to our reputation, direct damages, costs of repair and detection, and other expenses. The occurrence of any of the foregoing events could have a material adverse effect on our business, results of operations and financial condition.

We Are Controlled by Existing Stockholders And Therefore Other Stockholders Will Not Be Able to Direct The Company

The majority of our shares and thus voting control of the Company is held by a relatively small group of stockholders. Because of such ownership, those stockholders will effectively retain control of our Board of Directors and determine all of our corporate actions. In addition, the Company and stockholders owning 11,220,453 shares, or approximately 36% of the Company’s voting shares outstanding as of May 30, 2008 have executed a Shareholders’

Agreement that, among other provisions, gives Aspen, our largest stockholder, the right to elect three (3) out of the seven (7) Directors authorized for our Board, and nominate one (1) mutually acceptable independent Director. Accordingly, it is anticipated that Aspen and other parties to the Shareholders’ Agreement will continue to have the ability to elect a controlling number of the members of our Board of Directors and the minority stockholders of the Company may not be able to elect a representative to the our Board of Directors. Such concentration of ownership may also have the effect of delaying or preventing a change in control of the Company.

No Foreseeable Dividends

We do not anticipate paying dividends on our Common Stock in the foreseeable future. Rather, we plan to retain earnings, if any, for the operation and expansion of our business.

There May Not Be A Viable Public Market For Our Common Stock

We cannot predict the extent to which investor interest in our Company will sustain an active trading market for our Common Stock on The NASDAQ Over The Counter Bulletin Board (“OTCBB”) or any other stock market or how liquid any such market might remain. If an active public market is not sustained, it may be difficult for our stockholders to sell their shares of Common Stock at a price that is attractive to them, or at all.

We May Become Involved In Securities Class Action Litigation That Could Divert Management's Attention And Harm Our Business.

The stock markets have from time to time experienced significant price and volume fluctuations that have affected the market prices for the common stock of diagnostic companies. These broad market fluctuations may cause the market price of our Common Stock to decline. In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because clinical laboratory service companies have experienced significant stock price volatility in recent years. We may become involved in this type of litigation in the future. Litigation often is expensive and diverts management's attention and resources, which could adversely affect our business.

If We Are Not the Subject Of Securities Analyst Reports Or If Any Securities Analyst Downgrades Our Common Stock Or Our Sector, The Price Of Our Common Stock Could Be Negatively Affected.

Securities analysts may publish reports about us or our industry containing information about us that may affect the trading price of our Common Stock. There are many publicly traded companies active in the healthcare industry, which may mean it will be less likely that we receive analysts' coverage, which in turn could affect the price of our Common Stock. In addition, if a securities or industry analyst downgrades the outlook for our Common Stock or one of our competitors' stocks or chooses to terminate coverage of our Common Stock, the trading price of our Common Stock may also be negatively affected.

Changes In Regulations, Payor Policies Or Contracting Arrangements With Payors Or Changes In Other Laws, Regulations Or Policies May Adversely Affect Coverage Or Reimbursement For Our Specialized Diagnostic Services, Which May Decrease Our Revenues And Adversely Affect Our Results Of Operations And Financial Condition.

Governmental payors, as well as private insurers and private payors, have implemented and will continue to implement measures to control the cost, utilization and delivery of healthcare services, including clinical laboratory and pathology services. Congress has from time to time considered and implemented changes to laws and regulations governing healthcare service providers, including specialized diagnostic service providers. These changes have adversely affected and may in the future adversely affect coverage for our services. We also believe that healthcare professionals will not use our services if third party payors do not provide adequate coverage and reimbursement for them. These changes in federal, state, local and third party payor regulations or policies may decrease our revenues and adversely affect our results of operations and financial condition. We will continue to be a non-contracting provider until such time as we enter into contracts with third party payors for whom we are not currently contracted. Because a portion of our revenues is from third-party payors with whom we are not currently contracted, it is likely that we will be required to make positive or negative adjustments to accounting estimates with respect to contractual allowances in the future, which may adversely affect our results of operations, our credibility with financial analysts and investors, and our stock price.

We Must Hire And Retain Qualified Sales Representatives To Grow Our Sales.

Our ability to retain existing customers for our specialized diagnostic services and attract new customers is dependent upon retaining existing sales representatives and hiring new sales representatives, which is an expensive and time-consuming process. We face intense competition for qualified sales personnel and our inability to hire or retain an adequate number of sales representatives could limit our ability to maintain or expand our business and increase sales. Even if we are able to increase our sales force, our new sales personnel may not commit the necessary resources or provide sufficient high quality service and attention to effectively market and sell our services. If we are unable to maintain and expand our marketing and sales networks or if our sales personnel do not perform to our high standards, we may be unable to maintain or grow our existing business and our results of operations and financial condition will likely suffer accordingly. If a sales representative ceases employment, we risk the loss of customer goodwill based on the impairment of relationships developed between the sales representative and the healthcare professionals for whom the sales representative was responsible. This is particularly a risk if the representative goes to work for a competitor, as the healthcare professionals that are our customers may choose to use a competitor's services based on their relationship with the departed sales representative.

We Are Currently Expanding Our Infrastructure, Including Through The Acquisition And Development Of Additional Office Space And The Expansion Of Our Current Laboratory Capacity At Our Existing Facility, And We Intend To Further Expand Our Infrastructure By Establishing A New Laboratory Facility, Which, Among Other Things, Could Divert Our Resources And May Cause Our Margins To Suffer.

In November 2007, we entered into a lease which expires on June 30, 2010 for additional office space in Fort Myers, FL to house our expanding Florida laboratory, administrative, sales, billing and client services departments. Within the first half of 2008, we will initiate construction to expand our current laboratory capacity by building out unimproved areas within our existing facility. When the additional laboratory facility is operational, it may take time for us to derive the same economies of scale as in our existing facility. Each expansion of our facilities or systems could divert resources, including the focus of our management, away from our current business. In addition, expansions of our facilities may increase our costs and potentially decrease operating margins, both of which would, individually or in the aggregate, negatively impact our business, financial condition and results of operations.

We Rely On A Limited Number Of Third Parties For Manufacture And Supply Of Certain Of Our Critical Laboratory Instruments And Materials, And We May Not Be Able To Find Replacement Suppliers Or Manufacturers In A Timely Manner In The Event Of Any Disruption, Which Could Adversely Affect Our Business.

We rely on third parties for the manufacture and supply of some of our critical laboratory instruments, equipment and materials that we need to perform our specialized diagnostic services, and rely on a limited number of suppliers for certain laboratory materials and some of the laboratory equipment with which we perform our diagnostic services. We do not have long-term contracts with our suppliers and manufacturers that commit them to supply equipment and materials to us. Because we cannot ensure the actual production or manufacture of such critical equipment and materials, or the ability of our suppliers to comply with applicable legal and regulatory requirements, we may be subject to significant delays caused by interruption in production or manufacturing. If any of our third party suppliers or manufacturers were to become unwilling or unable to provide this equipment or these materials in required quantities or on our required timelines, we would need to identify and acquire acceptable replacement sources on a timely basis. While we have developed alternate sourcing strategies for the equipment and materials we use, we cannot be certain that these strategies will be effective and even if we were to identify other suppliers and manufacturers for the equipment and materials we need to perform our specialized diagnostic services, there can be no assurance that we will be able to enter into agreements with such suppliers and manufacturers or otherwise obtain such items on a timely basis or on acceptable terms, if at all. If we encounter delays or difficulties in securing necessary laboratory equipment or materials, including consumables, we would face an interruption in our ability to perform our specialized diagnostic services and experience other disruptions that would adversely affect our business, results of operations and financial condition.

Performance Issues, Service Interruptions Or Price Increases By Our Shipping Carrier Could Adversely Affect Our Business, Results Of Operations And Financial Condition, And Harm Our Reputation And Ability To Provide Our Specialized Diagnostic Services On A Timely Basis.

Expedited, reliable shipping is essential to our operations. One of our marketing strategies entails highlighting the reliability of our point-to-point transport of patient samples. We rely heavily on a single carrier, Federal Express, and also our local courier, for reliable and secure point-to-point transport of patient samples to our laboratory and enhanced tracking of these patient samples. Should Federal Express encounter delivery performance issues such as loss, damage or destruction

of a sample, it may be difficult to replace our patient samples in a timely manner and such occurrences may damage our reputation and lead to decreased demand for our services and increased cost and expense to our business. In addition, any significant increase in shipping rates could adversely affect our operating margins and results of operations. Similarly, strikes, severe weather, natural disasters or other service interruptions by delivery services we use would adversely affect our ability to receive and process patient samples on a timely basis. If Federal Express or we were to terminate our relationship, we would be required to find another party to provide expedited, reliable point-to-point transport of our patient samples. There are only a few other providers of such nationwide transport services, and there can be no assurance that we will be able to enter into arrangements with such other providers on acceptable terms, if at all. Finding a new provider of transport services would be time-consuming and costly and result in delays in our ability to provide our specialized diagnostic services. Even if we were to enter into an arrangement with such provider, there can be no assurance that they will provide the same level of quality in transport services currently provided to us by Federal Express. If the new provider does not provide the required quality and reliable transport services, it could adversely affect our business, reputation, results of operations and financial condition.

We Use Biological And Hazardous Materials That Require Considerable Expertise And Expense For Handling, Storage Or Disposal And May Result In Claims Against Us.

We work with hazardous materials, including chemicals, biological agents and compounds, blood samples and other human tissue that could be dangerous to human health and safety or the environment. Our operations also produce hazardous and biohazardous waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair business efforts. If we do not comply with applicable regulations, we may be subject to fines and penalties. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Our general liability insurance and/or workers' compensation insurance policy may not cover damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with fines in an amount exceeding our resources, and our operations could be suspended or otherwise adversely affected.

Our Failure To Comply With Governmental Payor Regulations Could Result In Our Being Excluded From Participation In Medicare, Medicaid Or Other Governmental Payor Programs, Which Would Decrease Our Revenues And Adversely Affect Our Results Of Operations And Financial Condition.

Reimbursement from Medicare and Medicaid accounted for approximately 52% and 38% of our revenues for the years ended December 31, 2007 and 2006, respectively. The Medicare program imposes extensive and detailed requirements on diagnostic services providers, including, but not limited to, rules that govern how we structure our relationships with physicians, how and when we submit reimbursement claims and how we provide our specialized diagnostic services. Our failure to comply with applicable Medicare, Medicaid and other governmental payor rules could result in our inability to participate in a governmental payor program, our returning funds already paid to us, civil monetary penalties, criminal penalties and/or limitations on the operational function of our laboratory. If we were unable to receive reimbursement under a governmental payor program, a substantial portion of our revenues would be lost, which would adversely affect our results of operations and financial condition.

Our Business Could Be Harmed By Future Interpretations Of Clinical Laboratory Mark-Up Prohibitions.

Our laboratory currently uses the services of outside reference laboratories to provide certain complementary laboratory services to those services provided directly by our laboratory. Although Medicare policies do not prohibit certain independent-laboratory-to-independent-laboratory referrals and subsequent mark-up for services, California and other states have rules and regulations that prohibit or limit the mark-up of these laboratory-to-laboratory services. A

challenge to our charge-setting procedures under these rules and regulations could have a material adverse effect on our business, results of operations and financial condition.

Failure To Comply With The HIPAA Security And Privacy Regulations May Increase Our Operational Costs.

The HIPAA privacy and security regulations establish comprehensive federal standards with respect to the uses and disclosures of PHI by health plans and healthcare providers, in addition to setting standards to protect the confidentiality, integrity and availability of electronic PHI. The regulations establish a complex regulatory framework on a variety of subjects, including the circumstances under which uses and disclosures of PHI are permitted or required without a specific authorization by the patient, including but not limited to treatment purposes, activities to obtain payments for services and healthcare operations activities; a patient's rights to access, amend and receive an accounting of certain disclosures of PHI;

the content of notices of privacy practices for PHI; and administrative, technical and physical safeguards required of entities that use or receive PHI electronically. We have implemented policies and procedures related to compliance with the HIPAA privacy and security regulations, as required by law. The privacy regulations establish a uniform federal "floor" and do not supersede state laws that are more stringent. Therefore, we are required to comply with both federal privacy regulations and varying state privacy laws. The federal privacy regulations restrict our ability to use or disclose patient identifiable laboratory data, without patient authorization, for purposes other than payment, treatment or healthcare operations (as defined by HIPAA), except for disclosures for various public policy purposes and other permitted purposes outlined in the privacy regulations. The privacy and security regulations provide for significant fines and other penalties for wrongful use or disclosure of PHI, including potential civil and criminal fines and penalties. Although the HIPAA statute and regulations do not expressly provide for a private right of damages, we also could incur damages under state laws to private parties for the wrongful use or disclosure of confidential health information or other private personal information.

Our Ability To Comply With The Financial Covenants In Our Credit Agreements Depends Primarily On Our Ability To Generate Substantial Operating Cash Flow.

Our ability to comply with the financial covenants under the agreement with CapitalSource Funding, LLC will depend primarily on our success in generating substantial operating cash flow. Our credit agreement contains numerous financial and other restrictive covenants, including restrictions on purchasing and selling assets, paying dividends to our shareholders, and incurring additional indebtedness. Our failure to meet these covenants could result in a default and acceleration of repayment of the indebtedness under our credit facility. If the maturity of our indebtedness were accelerated, we may not have sufficient funds to pay such indebtedness. In such event, our lenders would be entitled to proceed against the collateral securing the indebtedness, which includes substantially our entire accounts receivable, to the extent permitted by our credit agreements and applicable law.

We Have Potential Conflicts Of Interest Relating To Our Related Party Transactions Which Could Harm Our Business.

We have potential conflicts of interest relating to existing agreements we have with certain of our directors, officers, principal shareholders, shareholders and employees. Potential conflicts of interest can exist if a related party director or officer has to make a decision that has different implications for us and the related party. If a dispute arises in connection with any of these agreements, if not resolved satisfactorily to us, our business could be harmed. There can be no assurance that the above or any future conflicts of interest will be resolved in our favor. If not resolved, such conflicts could harm our business.

We Have Material Weaknesses In Our Internal Control Over Financial Reporting That May Prevent The Company From Being Able To Accurately Report Its Financial Results Or Prevent Fraud, Which Could Harm Its Business And Operating Results.

Effective internal controls are necessary for us to provide reliable and accurate financial reports and prevent fraud. In addition, Section 404 under the Sarbanes-Oxley Act of 2002 requires that we assess the design and operating effectiveness of internal control over financial reporting. If we cannot provide reliable and accurate financial reports and prevent fraud, our business and operating results could be harmed. We have discovered, and may in the future discover, areas of internal controls that need improvement. We have identified four material weaknesses in our internal controls as of December 31, 2007. These matters and our efforts regarding remediation of these matters, as well as efforts regarding internal controls generally are discussed in detail in our Annual Report on Form 10-KSB. However, as our material weaknesses in internal controls demonstrate, we cannot be certain that the remedial measures taken to date will ensure that we design, implement, and maintain adequate controls over financial processes and reporting in the future. Remedying the material weaknesses that have been presently identified, and any additional deficiencies, significant deficiencies or material weaknesses that we may identify in the future, could require us to incur significant costs, hire additional personnel, expend significant time and management resources or make other changes. Disclosure of our material weaknesses, any failure to remediate such material weaknesses in a timely fashion or having or maintaining ineffective internal controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Common Stock and access to capital.

Risks Related To This Offering

Future Sales By Our Stockholders May Adversely Affect Our Stock Price And Our Ability To Raise Funds In New Stock Offerings

Sales of our Common Stock in the public market following this offering could lower the market price of our Common Stock. Sales may also make it more difficult for us to sell equity securities or equity-related securities in the future

at a time and price that our management deems acceptable or at all. Of the 31,365,021 shares of Common Stock outstanding as of May 30, 2008, 15,270,341 shares are freely tradable without restriction, unless held by our “affiliates”. The remaining 16,094,680 shares of our Common Stock which are held by existing stockholders, including the officers and Directors, are “restricted securities” and may be resold in the public market only if registered or pursuant to an exemption from registration. Some of these shares may be resold under Rule 144.

The Selling Stockholders Intend To Sell Their Shares Of Common Stock In The Market, Which Sales May Cause Our Stock Price To Decline

The selling stockholders intend to sell in the public market 7,000,000 shares of our Common Stock being registered in this offering. That means that up to 7,000,000 shares may be sold pursuant to this Registration Statement. Such sales may cause our stock price to decline. Our Officers and Directors and those stockholders who are significant stockholders as defined by the SEC will continue to be subject to the provisions of various insider trading and Rule 144 regulations.

The Price You Pay In This Offering Will Fluctuate And May Be Higher Or Lower Than The Prices Paid By Other People Participating In This Offering

The price in this offering will fluctuate based on the prevailing market price of our Common Stock on the OTCBB. Accordingly, the price you pay in this offering may be higher or lower than the prices paid by other people participating in this offering.

Our Common Stock Is Deemed To Be “Penny Stock”, Which May Make It More Difficult For Investors To Sell Their Shares Due To Suitability Requirements

Our Common Stock is deemed to be “penny stock” as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Penny stocks are stocks:

With a price of less than $5.00 per share;

That are not traded on a “recognized” national exchange;

Whose prices are not quoted on the Nasdaq automated quotation system;

Nasdaq stocks that trade below $5.00 per share are deemed a “penny stock” for purposes of Section 15(b)(6) of the Exchange Act;

In issuers with net tangible assets less than $2.0 million (if the issuer has been in continuous operation for at least three (3) years) or $5.0 million (if in continuous operation for less than three (3) years), or with average revenues of less than $6.0 million for the last three (3) years.

Broker/dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor. These requirements may reduce the potential market for our Common Stock by reducing the number of potential investors. This may make it more difficult for investors in our Common Stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline.

FORWARD-LOOKING STATEMENTS

Information included or incorporated by reference in this prospectus may contain forward-looking statements. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may”, “should”, “expect”, “anticipate”, “estimate”, “believe”, “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.

This prospectus contains forward-looking statements, including statements regarding, among other things, (a) our projected sales and profitability, (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans and (e) our anticipated needs for working capital. These statements may be found under “Management’s Discussion and Analysis or Plan of Operations” and “Description of Business”, as well as in this prospectus generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this prospectus generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this prospectus will in fact occur.

SELLING STOCKHOLDERS

The following table presents information regarding our selling stockholders who intend to sell up to 7,000,000 shares of our Common Stock. A description of each stockholder’s relationship to the Company and how each selling stockholder acquired or will acquire shares to be sold in this offering is detailed in the information immediately following this table.

Selling Stockholders	Shares Beneficially Owned Before Offering(1)			Percentage of Outstanding Shares Beneficially Owned Before Offering(1)			Shares To Be Sold In The Offering			Percentage of Outstanding Shares Beneficially Owned After The Offering
James R. Rehak & Joann M. Rehak JTWROS		330,714			1.05	%		33,333			*	%
Leonard Samuels IRA		148,842			*			110,000			*
A. Scott Logan Revocable Living Trust		3,500,000	(2)		10.81	%		500,000			9.41	%
William J. Robison		91,000			*			55,000			*
Mosaic Partners Fund		-			*			177,500	(10)		*
Mosaic Partners Fund (US), LP		-			*			72,500	(11)		*
Ridgecrest Ltd.		63,600			*			53,000			*
Ridgecrest Partners QP, LP		246,000			*			205,000			*
Ridgecrest, LP		14,400			*			12,000			*
Leviticus Partners, LP		640,000			2.04	%		200,000			1.41	%
1837 Partners, L.P.		1,948,354			6.17	%		886,000	(3)		3.46	%
1837 Partners QP, L.P.		719,211			2.29	%		228,200	(4)		1.57	%
1837 Partners, Ltd.		734,325			2.34	%		235,500	(5)		1.60	%
Lewis Opportunity Fund, LP		215,523			*			1,077,617	(6)		*
LAM Opportunity Fund, Ltd.		44,143			*			220,717	(7)		*
Mark G. Egan IRA Rollover		720,000			2.29	%		600,000	(8)		*
Aspen Select Healthcare, L.P.		9,553,279			27.76	%		1,889,245			23.56	%
Michael T. Dent, M.D.		2,655,463			8.33	%		345,671			7..32	%
Noble International Investments, Inc.		98,417	(9)		*			98,417	(9)		*
Total:		21,723,271			58.89	%		7,000,000			49.26	%

*	Less than one percent (1%).

(1)

Applicable percentage of ownership is based on 31,365,021 shares of our Common Stock outstanding as of May 30, 2008, together with securities exercisable or convertible into shares of Common Stock within sixty (60) days of May 30, 2008, for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Note that affiliates are subject to Rule 144 and insider trading regulations - percentage computation is for form purposes only.

(2)

SKL Family Limited Partnership has direct ownership of 2,000,000 shares and currently exercisable warrants to purchase 1,000,000 shares. A. Scott Logan Revocable Living Trust has direct ownership of 500,000 shares. A. Scott Logan is the general partner SKL Limited Family Partnership and trustee for A. Scott Logan Revocable Living Trust. A. Scott Logan has only 1% of the assets of SKL Family Limited Partnership. An additional 1% of asset is owned by A. Scott Logan son’s, and 98% of asserts is owned by a grantor retained annuity trust.

(3)	Of these shares, 383,100 were acquired by 1837 Partners, L.P. as an Investor from the Company and 502,900 were acquired as an Investor from Aspen in connection with the Private Placement.

(4)	Of these shares, 108,000 were acquired by 1837 Partners QP, L.P. as an Investor from the Company and 120,500 were acquired as an Investor from Aspen in connection with the Private Placement.

(5)	Of these shares, 108,900 were acquired by 1837 Partners Ltd. as an Investor from the Company and 126,600 were acquired as an Investor from Aspen in connection with the Private Placement.

(6)

Of these shares, 455,117 were acquired by Lewis Opportunity Fund, LP as an Investor from the Company, 207,500 were acquired as an Investor from Aspen in connection with the Private Placement and 415,000 were issued by the Company upon the conversion of warrants previously purchased from Aspen. Subsequent to the purchase of these shares and prior to the effectiveness of this Registration Statement, all of these shares were sold pursuant to Rule 144.

(7)

Of these shares, 93,217 were acquired by Lewis Opportunity Fund, Ltd. as an Investor from the Company, 42,500 were acquired as an Investor from Aspen in connection with the Private Placement and 85,000 were issued by the Company upon the conversion of warrants previously purchased from Aspen. Subsequent to the purchase of these shares and prior to the effectiveness of this Registration Statement, all of these shares were sold pursuant to Rule 144.

(8)	Of these shares, 100,000 were acquired by Mark G. Egan IRA Rollover as an Investor from the Company and 500,000 were acquired from Aspen in connection with the Private Placement.

(9)	These shares represent shares of our Common Stock issuable to Noble upon conversion of currently exercisable warrants issued by the Company in connection with the Private Placement for Noble’s service as placement agent.

(10)

Subsequent to the purchase of these shares in the Private Placement and prior to the effectiveness of this Registration Statement, Mosaic Partners Fund was liquidated and 135,055 shares were sold to 1837 Partners, LP, 40,980 shares were sold to 1837 Partners, QP LP and 1,465 shares were sold to 1837 Partners, Ltd.

(11)

Subsequent to the purchase of these shares in the Private Placement and prior to the effectiveness of this Registration Statement, Mosaic Partners Fund (US), LP was liquidated and 42,500 shares were sold to 1837 Partners, Ltd., 15,000 shares were sold to Ms. Frances E. Tuite, and 15,000 shares were sold to Mr. Blair R. Haarlow. Ms. Tuite and Mr. Haarlow are both affiliated with RMB Capital Management, which makes all the investment decisions for the 1837 Partners LP, 1837 Partners QP, LP and 1837 Partners Ltd.

The following information contains a description of each selling stockholder’s relationship to us and how each selling stockholder acquired or will acquire shares to be sold in this offering is detailed below. None of the selling stockholders have held a position or office, or had any other material relationship, with us, except as follows:

Shares Acquired In Connection With Private Placement

During the period from May 31, 2007 through June 6, 2007, the Company sold 2,666,667 shares of Common Stock to the Investors who are listed herein below pursuant to the Private Placement at a price equal to $1.50 per share. This resulted in the Company receiving gross proceeds of $4 million in cash. After estimated transaction costs, the Parent Company received net cash proceeds of $3.75 million. The Investors received registration rights with their shares, and therefore all of those 2,666,667 shares are being registered hereunder. Each of the Investors listed below are accredited investors.

James R. Rehak & Joann M. Rehak JTWROS (Rehaks). The Rehaks purchased 33,333 shares of our Common Stock at a purchase price of $1.50 per share, and the Company in turn received $50,000 as part of the Private Placement. The Rehaks received registration rights with the shares and therefore, we are registering these 33,000 shares in this offering. All investment decisions of the Rehaks are made by James R. Rehak and Joann M. Rehak.

Leonard Samuels IRA (LSI). LSI purchased 110,000 shares of our Common Stock at a purchase price of $1.50 per share, and the Company in turn received $165,000 as part of the Private Placement. LSI received registration rights with the shares and therefore, we are registering these 110,000 shares in this offering. All investment decisions of LSI are made by Charles Schwab & Co. Inc., as Custodian for Leonard Samuels IRA.

A. Scott Logan Revocable Living Trust (SL Trust). SL Trust purchased 500,000 shares of our Common Stock at a purchase price of $1.50 per share, and the Company in turn received $750,000 as part of the Private Placement. SL Trust received registration rights with the shares and therefore, we are registering these 500,000 shares in this offering. All investment decisions of SL Trust are made by A. Scott Logan, Trustee.

William J. Robison (Mr. Robison). Mr. Robison, who serves as a member of the Board of Directors of the Company, purchased 55,000 shares of our Common Stock at a purchase price of $1.50 per share, and the Company in turn received $82,500 as part of the Private Placement. Mr. Robison received registration rights with the shares and therefore, we are registering these 55,000 shares in this offering.

1837 Partners, L.P. (1837P1). 1837P1 purchased 383,100 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $574,650 as part of the Private Placement. 1837P1 received registration rights with the shares and therefore, we are registering these 383,100 shares in this offering. All investment decisions of 1837P1 are made by Frances Tuite. Subsequent to the Private Placement by the Company, 1837P1 purchased135,055 shares from Mosaic.

1837 Partners QP, L.P. (1837P2). 1837P2 purchased 108,000 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $162,000 as part of the Private Placement. 1837P2 received registration rights with the shares and therefore, we are registering these 108,000 shares in this offering. All investment decisions of 1837P2 are made by Frances Tuite. Subsequent to the Private Placement by the Company, 1837P2 purchased 40,980 shares from Mosaic.

1837 Partners, Ltd. (1837P3). 1837P3 purchased 108,900 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $163,350 as part of the Private Placement. 1837P3 received registration rights with the shares and therefore, we are registering these 383,100 shares in this offering. All investment decisions of 1837P3 are made by Frances Tuite. Subsequent to the offering by the Company, 1837P3 purchased 1,465 shares from Mosaic and 42,500 shares from MPF.

Lewis Opportunity Fund, LP (LOF). LOF purchased 455,117 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $682,676 as part of the Private Placement. LOF received registration rights with the shares and therefore, we are registering these 455,117 shares in this offering. All investment decisions of LOF are made by Austin Lewis. Subsequent to the Private Placement, but prior to the effectiveness of this Registration Statement, LOF sold all of these shares pursuant to Rule 144.

LAM Opportunity Fund, Ltd. (LAMOF). LAMOF purchased 93,217 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $139,826 as part of the Private Placement. LAMOF received registration rights with the shares and therefore, we are registering these 93,217 shares in this offering. All investment decisions of LAMOF are made by Austin Lewis. Subsequent to the Private Placement, but prior to the effectiveness of this Registration Statement, LAMOF sold all of these shares pursuant to Rule 144.

Mark G. Egan IRA Rollover (MGE). MGE purchased 100,000 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $150,000 as part of the Private Placement. MGE received registration rights with the shares and therefore, we are registering these 100,000 shares in this offering. All investment decisions of MGE are made by Marlin Capital.

Mosaic Partners Fund (Mosaic). Mosaic purchased 177,500 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $266,250 as part of the Private Placement. Mosaic received registration rights with the shares and therefore, we are registering these 177,500 shares in this offering. All investment decisions of Mosaic are made by Ajay Sekhand. Subsequent to the offering Mosaic was liquidated and 135,055 shares were sold to 1837 Partners, LP, 40,980 shares were sold to 1837 Partners, QP LP and 1,465 shares were sold to 1837 Partners, Ltd.

Mosaic Partners Fund (US), LP (MPF). MPF purchased 72,500 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $108,750 as part of the Private Placement. MPF received registration rights with the shares and therefore, we are registering these 72,500 shares in this offering. All investment decisions of MPF are made Ajay Sekhand. Subsequent to the offering Mosaic was liquidated and 42,500 shares were sold to 1837 Partners, Ltd., 15,000 shares were sold to Ms. Frances E. Tuite, and 15,000 shares were sold to Mr. Blair R. Haarlow. Ms. Tuite and Mr. Haarlow are both affiliated with RMB Capital Management, which makes all the investment decisions for the 1837 Partners LP, 1837 Partners QP, LP and 1837 Partners Ltd.

Ridgecrest Ltd. (Ridgecrest). Ridgecrest purchased 53,000 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $79,500 as part of the Private Placement. Ridgecrest received registration rights with the shares and therefore, we are registering these 53,000 shares in this offering. All investment decisions of Ridgecrest are made by Todd McElroy.

Ridgecrest Partners QP, LP (Ridgecrest II). Ridgecrest II purchased 205,000 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $307,500 as part of the Private Placement. Ridgecrest II received registration rights with the shares and therefore, we are registering these 205,000 shares in this offering. All investment decisions of Ridgecrest II are made by Todd McElroy.

Ridgecrest, LP (Ridgecrest III). Ridgecrest III purchased 12,000 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $18,000 as part of the Private Placement. Ridgecrest III received registration rights with the shares and therefore, we are registering these 12,000 shares in this offering. All investment decisions of Ridgecrest III are made by Todd McElroy.

Leviticus Partners, LP (Leviticus). Leviticus purchased 200,000 shares of our Common Stock from the Company at a purchase price of $1.50 per share, and the Company in turn received $300,000 as part of the Private Placement. Leviticus received registration rights with the shares and therefore, we are registering these 200,000 shares in this offering. All investment decisions of Leviticus are made by Adam M. Hutt.

During the period from June 1, 2007 through June 5, 2007, the Investors purchased 1,500,000 shares of Common Stock from Aspen in connection with the Private Placement. The Investors received registration rights with their shares, and therefore all of those 1,500,000 shares are being registered hereunder. Each of the Investors is an accredited investor.

1837 Partners, L.P. (1837P1). 1837P1 purchased 502,900 shares of our Common Stock from Aspen on June 1, 2007 and received registration rights with the shares and therefore, we are registering these 502,900 shares in this offering.

1837 Partners QP, L.P. (1837P2). 1837P2 purchased 120,500 shares of our Common Stock on June 1, 2007 and received registration rights with the shares and therefore, we are registering these 108,000 shares in this offering.

1837 Partners, Ltd. (1837P3). 1837P3 purchased 126,600 shares of our Common Stock from Aspen on June 1, 2007 and received registration rights with the shares and therefore, we are registering these 126,600 shares in this offering.

Lewis Opportunity Fund, LP (LOF). LOF purchased 207,500 shares of our Common Stock from Aspen on June 5, 2007 and received registration rights with the shares and therefore, we are registering these 207,500 shares in this offering. All investment decisions of LOF are made by LAM. Subsequent to the Private Placement, but prior to the effectiveness of this Registration Statement, LOF sold all of these shares pursuant to Rule 144.

LAM Opportunity Fund, Ltd. (LAMOF). LAMOF purchased 42,500 shares of our Common Stock from Aspen on June 5, 2007 and received registration rights with the shares and therefore, we are registering these 42,500 shares in this offering. Subsequent to the Private Placement, but prior to the effectiveness of this Registration Statement, LAMOF sold all of these shares pursuant to Rule 144.

Lewis Opportunity Fund, LP (LOF). LOF purchased from Aspen a warrant to purchase 415,000 shares of our Common Stock on June 6, 2007 and received registration rights for the shares underlying the warrant. On June 6, 2007, 2007, LOF exercised the warrant whereby the Company issued and sold to LOF 415,000 shares at $0.26 per share. As a result, the Company received $107,900. We are registering these 415,000 shares in this offering. All investment decisions of LOF are made by Austin Lewis. Subsequent to the Private Placement, but prior to the effectiveness of this Registration Statement, LOF sold all of these shares pursuant to Rule 144.

LAM Opportunity Fund, Ltd. (LAMOF). LAMOF purchased from Aspen a warrant to purchase 85,000 shares of our Common Stock on June 6, 2007 and received registration rights for the shares underlying the warrant. On June 6, 2007, LAMOF exercised the warrant whereby the Company issued and sold to LAMOF 85,000 shares at $0.26 per share. As a result, the Company received $22,100. We are registering these 85,000 shares in this offering. All investment decisions of LAMOF are made by Austin Lewis. Subsequent to the Private Placement, but prior to the effectiveness of this Registration Statement, LAMOF sold all of these shares pursuant to Rule 144.

Mark G. Egan IRA Rollover (MGE). MGE purchased 500,000 shares of our Common Stock from Aspen on June 5, 2007 and received registration rights with the shares and therefore, we are registering these 500,000 shares in this offering.

Other Selling Stockholders

Noble International Investments, Inc. (Noble). The Company engaged Noble, an unaffiliated registered broker-dealer, to advise us as our placement agent in connection with the Private Placement pursuant to that certain Letter Agreement, dated May 21, 2007, by and between the Parent Company and Noble. In consideration for its services, Noble received (a) warrants to purchase 98,417 shares of our Common Stock, which such warrants have a five (5) year term, a purchase price equal to $1.50 per share, cashless exercise provisions, customary anti-dilution provisions and the same other terms, conditions, rights and preferences as those shares sold to the Investors by the Company in the Private Placement, and (b) an additional cash fee equal to five percent (5%) of the gross proceeds from each sale made to the Investors by the Company, or $147,625.50. Noble received piggy-back registration rights with its shares, and therefore we are registering 98,417 shares for Noble hereunder. All investment decisions for Noble are made by Shaun Titcomb.

Aspen Select Healthcare, L.P. (Aspen). In April 2003, we conducted a private placement to Aspen and its affiliates in which we received net proceeds of $114,271 (after deducting certain transaction expenses) through the issue of 13,927,062 shares of Common Stock. In the April 2003 transaction, Aspen purchased 9,303,279 shares, of which 1,300,000 were subsequently transferred to other entities. All investment decisions of Aspen are made by Mr. Steven C. Jones, a member of our Board of Directors and our Acting Principal Financial Officer. We are registering 1,889,245 of these shares in this offering.

Certain Funds of Lewis Asset Management, Inc. (LAM). Lewis Opportunity Fund and LAM Opportunity Fund received shares of our Common Stock issued by the Company upon the exercise of warrants on June 6, 2007. These warrants had been previously purchased by the funds from Aspen on June 6, 2007. Subsequent to the exercise of these warrants, but prior to the effectiveness of this Registration Statement, LAM sold all of these shares pursuant to Rule 144.

USE OF PROCEEDS

This prospectus relates to shares of our Common Stock that may be offered and sold from time to time by certain selling stockholders. There will be no proceeds to us from the sale of shares of Common Stock in this offering.

PLAN OF DISTRIBUTION

The selling stockholders have advised us that the sale or distribution of our Common Stock owned by the selling stockholders may be effected directly to purchasers by the selling stockholders as principals or through one or more underwriters, brokers, dealers or agents from time to time in one or more transactions (which may involve crosses or block transactions) (i) on the over-the-counter market or in any other market on which the price of our shares of Common Stock are quoted or (ii) in transactions otherwise than on the over-the-counter market or in any other market on which the price of our shares of Common Stock are quoted. Any of such transactions may be effected at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at varying prices determined at the time of sale or at negotiated or fixed prices, in each case as determined by the selling stockholders or by agreement between the selling stockholders and underwriters, brokers, dealers or agents, or purchasers. If the selling stockholders effect such transactions by selling their shares of our Common Stock to or through underwriters, brokers, dealers or agents, such underwriters, brokers, dealers or agents may receive compensation in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of Common Stock for whom they may act as agent (which discounts, concessions or commissions as to particular underwriters, brokers, dealers or agents may be in excess of those customary in the types of transactions involved).

Under the securities laws of certain states, the shares of our Common Stock may be sold in such states only through registered or licensed brokers or dealers.

The selling stockholders are advised to ensure that any underwriters, brokers, dealers or agents effecting transactions on behalf of the selling stockholders are registered to sell securities in all fifty (50) states. In addition, in certain states shares of our Common Stock may not be sold unless the shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

We will pay all expenses incident to the registration, offering and sale of the shares of our Common Stock to the public hereunder other than commissions, fees and discounts of underwriters, brokers, dealers and agents. If any of these other expenses exists, we expect the selling stockholders to pay these expenses.

We estimate that the expenses of the offering to be borne by us will be approximately $85,000. The offering expenses consisted of: a SEC registration fee of $885, printing expenses of $2,500; accounting fees of $15,000; legal fees of $30,000 and miscellaneous expenses of $36,600. We will not receive any proceeds from the sale of any of the shares of our Common Stock by the selling stockholders.

The selling stockholders are subject to applicable provisions of the Exchange Act and its regulations, including, Regulation M. Under Regulation M, the selling stockholders or their agents may not bid for, purchase, or attempt to induce any person to bid for or purchase, shares of our Common Stock while such selling stockholders are distributing shares covered by this prospectus. Pursuant to the requirements of Item 512 of Regulation S-K and as stated in Part II of this Registration Statement, we must file a post-effective amendment to the accompanying Registration Statement once informed of a material change from the information set forth with respect to the Plan of Distribution.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Introduction

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements, and the Notes thereto included herein. The information contained below includes statements of the Company’s or management’s beliefs, expectations, hopes, goals and plans that, if not historical, are forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion on forward-looking statements, see the information set forth in the Introductory Note to this Annual Report under the caption “Forward Looking Statements”, which information is incorporated herein by reference.

Overview

NeoGenomics operates a network of cancer-focused testing laboratories that specifically target the rapidly growing genetic and molecular testing segment of the medical laboratory industry. We currently operate in three laboratory locations: Fort Myers, Florida, Nashville, Tennessee and Irvine, California. We currently offer throughout the United States the following types of testing services to oncologists, pathologists, urologists, hospitals, and other laboratories: a) cytogenetics testing, which analyzes human chromosomes, b) Fluorescence In-Situ Hybridization (FISH) testing, which analyzes abnormalities at the chromosome and gene levels, c) flow cytometry testing services, which analyzes gene expression of specific markers inside cells and on cell surfaces, d) morphological testing, which analyzes cellular structures and e) molecular testing which involves, analysis of DNA and RNA and predict the clinical significance of various cancers. All of these testing services are widely used in the diagnosis and prognosis of various types of cancer.

Our Common Stock is listed on the OTCBB under the symbol “NGNM.OB.”

Critical Accounting Policies

The preparation of financial statements in conformity with United States generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. For a complete description of our significant accounting policies, see Note B to our Consolidated Financial Statements included herein.

Our critical accounting policies are those where we have made difficult, subjective or complex judgments in making estimates, and/or where these estimates can significantly impact our financial results under different assumptions and conditions. Our critical accounting policies are:

Revenue Recognition

Accounts Receivable

Accounting For Contingencies

Stock Based Compensation

Revenue Recognition

The Company recognizes revenues in accordance with the SEC Staff Accounting Bulletin No. 104, “Revenue Recognition”, when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

The Company’s specialized diagnostic services are performed based on a written test requisition form and revenues are recognized once the diagnostic services have been performed, the results have been delivered to the ordering physician, the payor has been identified and eligibility and insurance have been verified. These diagnostic services are billed to various payors, including Medicare, commercial insurance companies, other directly billed healthcare institutions such as hospitals and clinics, and individuals. The Company reports revenues from contracted payors, including Medicare, certain insurance

companies and certain healthcare institutions, based on the contractual rate, or in the case of Medicare, published fee schedules. The Company reports revenues from non-contracted payors, including certain insurance companies and individuals, based on the amount expected to be collected. The difference between the amount billed and the amount expected to be collected from non-contracted payors is recorded as a contractual allowance to arrive at the reported revenues. The expected revenues from non-contracted payors are based on the historical collection experience of each payor or payor group, as appropriate. In each reporting period, the Company reviews its historical collection experience for non-contracted payors and adjusts its expected revenues for current and subsequent periods accordingly.

Trade Accounts Receivable and Allowance For Doubtful Accounts

We record accounts receivable net of estimated discounts, contractual allowances and allowances for bad debts. We provide for accounts receivable that could become uncollectible in the future by establishing an allowance to reduce the carrying value of such receivables to their estimated net realizable value. We estimate this allowance based on the aging of our accounts receivable and our historical collection experience for each type of payor. Receivables are charged off to the allowance account at the time they are deemed uncollectible. In the event that the actual amount of payment received differs from the previously recorded estimate of an account receivable, an adjustment to revenue is made in the current period at the time of final collection and settlement. During 2007, we recorded approximately $24,000 of net total incremental revenue from tests in which we underestimated the revenue in 2006 relative to the amounts that we were ultimately paid in 2007. This was less than 1% of our total FY 2007 revenue and less than 1% of our FY 2006 revenue. These adjustments are not material to the Company’s results of operations in any period presented. Our estimates of net revenue are subject to change based on the contractual status and payment policies of the third party payor’s with whom we deal. We regularly refine our estimates in order to make our estimated revenue for future periods as accurate as possible based on our most recent collection experience with each third party payor.

The following tables present the dollars and percentage of the Company’s net accounts receivable from customers outstanding by aging category at December 31, 2007 and 2006. All of our receivables were pending approval by third-party payors as of the date that the receivables were recorded:

NEOGENOMICS AGING OF RECEIVABLES BY PAYOR GROUP

December 31, 2007
Payor Group		0-30	%				30-60	%				60-90	%				90-120	%			> 120		%			Total		%
Client	$	159,649		4	%	$	148,909		4	%	$	200,073		5	%	$	69,535		2	%	$	122,753		3	%	$	700,919		19	%
Commercial Insurance		427,876		12	%		184,761		5	%		126,477		3	%		66,922		2	%		487,387		13	%		1,293,423		35	%
Medicaid		918		0	%		904		0	%		2,331		0	%		1,292		0	%		11,892		0	%		17,337		0	%
Medicare		662,560		18	%		293,870		8	%		94,755		3	%		70,579		2	%		486,002		13	%		1,607,766		44	%
Self Pay		9,745		0	%		6,324		0	%		6,889		0	%		3,238		0	%		5,658		0	%		31,854		1	%
Total	$	1,260,748		34	%	$	634,768		17	%	$	430,525		12	%	$	211,566		6	%	$	1,113,692		31	%	$	3,651,299		100	%

December 31, 2006
Payor Group		0-30	%				30-60	%				60-90	%				90-120	%			> 120		%			Total		%
Client	$	146,005		9	%	$	150,698		10	%	$	79,481		5	%	$	8,606		1	%	$	33,827		2	%	$	418,617		27	%
Commercial Insurance		133,333		8	%		105,464		7	%		58,026		4	%		48,847		3	%		35,248		2	%		380,918		24	%
Medicaid		325		0	%		650		0	%		2,588		0	%		400		0	%		-		0	%		3,963		0	%
Medicare		293,298		19	%		282,463		18	%		71,283		5	%		68,830		4	%		56,598		4	%		772,472		49	%
Self Pay		135		0	%		2,058		0	%		723		0	%		-		0	%		-		0	%		2,916		0	%
Total	$	573,096		36	%	$	541,333		35	%	$	212,101		13	%	$	126,683		8	%	$	125,673		8	%	$	1,578,886		100	%

The large increase in our accounts receivable greater than 120 days as of December 31, 2007 as compared to December 31, 2006 was the result of several factors. In the fourth quarter of 2006, the Company implemented a new billing system that was not scalable as our volume continued to grow and this made accounts receivable management very difficult. In 2007, as we grew, we determined that we also needed proper management in this area. Accordingly, in the fourth quarter of 2007, we reorganized our entire billing department and replaced the existing billing system and we discovered an issue with incorrectly filed claims, that were aged significantly and the clean-up of these claims was ongoing in the first quarter of 2008. The new billing system went live in March 2008 and is designed specifically for laboratory billing

Based on a detailed analysis, we believe that our $415,000 allowance for doubtful accounts, which represents approximately 11% of our receivables balance, is adequate as of December 31, 2007. At December 31, 2006, our allowance for doubtful accounts was $103,000 or 6% of accounts receivable.

Accounting for Contingencies

When involved in litigation or claims, in the normal course of our business, we follow the provisions of SFAS No. 5, Accounting for Contingencies, to record litigation or claim-related expenses. We evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. We accrue for settlements when the outcome is probable and the amount or range of the settlement can be reasonably estimated. In addition to our judgments and use of estimates, there are inherent uncertainties surrounding litigation and claims that could result in actual settlement amounts that differ materially from estimates. With respect to claims brought against the Company by Accupath Diagnostics Laboratories, Inc. (“US Labs”), on April 23, 2008, the Company and US Labs entered into a settlement agreement and release (the “Settlement Agreement”); whereby, both parties agreed to settle and resolve all claims asserted in and arising out of the aforementioned lawsuit. Pursuant to the Settlement Agreement, we are required to pay $500,000 to US Labs, of which $250,000 was paid on May 1, 2008 with funds from the Company’s insurance carrier and the remaining $250,000 shall be paid by the Company on the last day of each month in equal installments of $31,250 commencing on May 31, 2008. Under the terms of the Settlement Agreement, there are certain provisions agreed to in the event of default.

Stock Based Compensation.

Prior to January 1, 2006, we accounted for stock-based awards and our Employee Stock Purchase Plan using the intrinsic method in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees”, FASB Interpretation No. 44 (“FIN 44”) “Accounting for Certain Transactions Involving Stock-Based Compensation, an Interpretation of APB Opinion No. 25”,FASB Technical Bulletin No. 97-1 (“FTB 97-1”) “Accounting under Statement 123 for Certain Employee Stock Purchase Plans with a Look-Back Option”, and related interpretations and provided the required pro forma disclosures of SFAS 123 ”Accounting for Stock-Based Compensation “. In accordance with APB 25, non-cash, stock-based compensation expense was recognized for any options for which the exercise price was below the market price on the actual grant date and for any grants that were modified from their original terms. The charge for the options with an exercise price below the market price on the actual grant date was equal to the number of options multiplied by the difference between the exercise price and the market price of the option shares on the actual grant date. That expense was amortized over the vesting period of the options. The charge for modifications of options in general was equal to the number of options modified multiplied by the difference between the market price of the options on the modification date and the grant price. The charge for modified options was taken over the remaining service period, if any.

Effective January 1, 2006, we adopted SFAS 123(R), which requires the measurement at fair value and recognition of compensation expense for all stock-based payment awards. We selected the modified prospective method of adoption which recognizes compensation expense for the fair value of all stock-based payments granted after January 1, 2006 and for the fair value of all awards granted to employees prior to January 1, 2006 that remain unvested on the date of adoption. We used the trinomial lattice valuation model to estimate fair value of stock option grants made on or after January 1, 2006. The trinomial lattice option-pricing model requires the estimation of highly complex and subjective variables. These variables include expected volatility, expected life of the award, expected dividend rate and expected risk-free rate of return. The assumptions for expected volatility and expected life are the two assumptions that most significantly affect the grant date fair value. The expected volatility is a blended rate based on both the historical volatility of our stock price and the volatility of certain peer company stock prices. The expected term assumption for our stock option grants was determined using trinomial lattice simulation model which projects future option holder behavior patterns based upon actual historical option exercises. SFAS 123(R) also requires the application of a forfeiture rate to the calculated fair value of stock options on a prospective basis. Our assumption of forfeiture rate represents the historical rate at which our stock-based awards were surrendered prior to vesting over the trailing four years. If our assumption of forfeiture rate changes, we would have to make a cumulative adjustment in the current period. We monitor the assumptions used to compute the fair value of our stock options and similar awards on a regular basis and we will revise our assumptions as appropriate. See Note B – Summary of Significant Accounting Policies section, “Stock-based compensation” subsection and Note F – Stock Based Compensation in the Notes to Consolidated Financial Statements of our Annual Report on Form 10-KSB as filed with the SEC on April 14, 2008 for more information regarding the valuation of stock-based compensation. Results Of Operations For The Three Months Ended March 31, 2008 As Compared To The Three Months Ended March 31, 2007

Results Of Operations For The Three Months Ended March 31, 2008 As Compared To The Three Months Ended March 31, 2007

Revenue

During the three months ended March 31, 2008, our revenues increased approximately 86% to $4,162,800 from $2,242,700 during the three months ended March 31, 2007. This was the result of a 61% increase in testing volume and a 15% increase in average revenue per test. This volume increase is the result of wide acceptance of our bundled testing product offering and our industry leading turnaround times resulting in new customers. The increase in average revenue per test is primarily attributable to an increase in certain Medicare reimbursements for 2008, and a modest increase in flow cytometry testing which has the highest reimbursement rate of any test we offer. Revenues per test are a function of both the nature of the test and the payor (Medicare, Medicaid, third party insurer, institutional client etc.). Our policy is to record as revenue the amounts that we expect to collect based on published or contracted amounts and/or prior experience with the payor. We have established a reserve for uncollectible amounts based on estimates of what we will collect from a) third-party payors with whom we do not have a contractual arrangement or sufficient experience to accurately estimate the amount of reimbursement we will receive, b) co-payments directly from patients, and c) those procedures that are not covered by insurance or other third party payors. On March 31, 2008, our allowance for doubtful accounts was $390,275, a 209% increase from our balance at March 31, 2007 of $126,363. The allowance for doubtful accounts was approximately 11.7% and 6.0% of accounts receivables on March 31, 2008 and March 31, 2007, respectively. This increase was the result of an increase in accounts receivable due to increased revenues and the increase in the percentage of our aged accounts receivable greater than 120 days. The increase in accounts receivable greater than 120 days old was primarily the result of two factors. First, in July 2007 we determined that our current billing system was not scalable as our volume grew and made management of accounts receivable very difficult. Second, in 2007 we determined that we were understaffed and lacked adequate management in our billing department. Therefore, in the fourth quarter of 2007 we reorganized our billing department and in the first quarter of 2008 we implemented a new billing system. We are still in the process of resolving previous billing claim issues which has resulted in a much higher allowance for doubtful accounts as a percentage of accounts receivable. As a result, the percentage of our claims over 120 days at March 31, 2008 declined 5% from the previous period ended December 31, 2007.

Cost of Revenue

During the three months ended March 31, 2008, our cost of revenue, as a percentage of revenue, increased from 42% for the three months ended March 31, 2007 to 45%. This was primarily a result of increases in the number of employees and related benefits as well as increased facilities and other related costs as the Company expanded in 2007 in order to have additional capacity in order to handle anticipated growth in 2008.

General and Administrative Expenses

For the three months ended March 31, 2008, our general and administrative expenses increased by approximately 76% to $2,514,600 from approximately $1,426,500 for the three months ended March 31, 2007. General and administrative expenses, as a percentage of sales were 60% for the three months ended March 31, 2008, compared with 64% for the three months ended March 31, 2007, a decrease of 4%. This decrease was primarily a net result of an 8% decrease in legal expense as a percentage of revenue offset by a 5% increase in bad debt expense as a percentage of revenue. Bad debt expense for the three months ended March 31, 2008 and March 31, 2007 was $425,500 and $110,000, respectively. This increase was necessitated by the significant increase in revenues noted above and to a lesser extent by the issues denoted in the revenue paragraph above and in our critical accounting policies as described herein.

Other Income/Expense

Interest expense, net decreased approximately 44% in the first three months of 2008 to approximately $55,100 from approximately $98,900 for the first three months of 2007. This decrease is primarily a result of the different amounts and borrowing instruments in place in the respective periods. Interest expense for the period ended March 31, 2008 is related to our new credit facility, while interest expense for the period ended March 31, 2007 was related to our previous credit facility with Aspen.

Net Loss

As a result of the foregoing, our net loss increased from approximately ($219,500) for the three months ended March 31, 2007 to approximately ($265,400) for the three months ended March 31, 2008, an increase in loss of $45,818 or 21%.

Liquidity and Capital Resources

During the three months ended March 31, 2008, our operating activities provided approximately $201,400 in cash compared with $382,000 used in the three months ended March 31, 2007. We also spent approximately $23,100 on new equipment during the three months ended March 31, 2008, compared with $24,400 for the three months ended March 31, 2007. At March 31, 2008 and March 31, 2007, we had cash and cash equivalents of approximately $330,358 and $575,393, respectively. At the present time, we anticipate that based on our current business plan and operations, our existing cash balances, the availability of our accounts receivable line with CapitalSource, that we will have adequate cash for at least the next twelve months. This estimate of our cash needs does not include any additional funding which may be required for growth in our business beyond that which is planned, strategic transactions, or acquisitions. In the event that the Company grows faster than we currently anticipate or we engage in strategic transactions or acquisitions and our cash on hand and/or our availability under the CapitalSource Credit Facility is not sufficient to meet our financing needs, we may need to raise additional capital from other resources. In such event, the Company may not be able to obtain such funding on attractive terms, or at all, and the Company may be required to curtail its operations. In the event that we do need to raise additional capital, we would seek to raise this additional money through issuing a combination of debt and/or equity securities primarily through banks and/or other large institutional investors. On March 31, 2008, we had $330,358 in cash on hand and approximately $1,036,000 of availability under our Credit Facility.

Results Of Operations For The Twelve Months Ended December 31, 2007 As Compared With The Twelve Months Ended December 31, 2006

Revenue

During the fiscal year ended December 31, 2007, our revenues increased approximately 78% to $11,505,000 from $6,476,000 during the fiscal year ended December 31, 2006. This was the result of an increase in testing volume of 64% and a 9% increase in average revenue per test. This volume increase is the result of wide acceptance of our bundled testing product offering and our industry leading turnaround times resulting in new customers. The increase in average revenue per test is a direct result of restructuring arrangements with certain existing customers that increased average revenue per test and realigning our pricing policies with new customers.

During the twelve months ended December 31, 2007, our average revenue per customer requisition increased by approximately 4% to $702.15 from $677.19 in 2006. Our average revenue per test increased by approximately 9% to $547.90 in 2007 from $504.44 in 2006. This was primarily a result of price increases to certain customers as well as product and payor mix changes. Revenues per test are a function of both the nature of the test and the payor (Medicare, Medicaid, third party insurer, institutional client etc.). Our policy is to record as revenue the amounts that we expect to collect based on published or contracted amounts and/or prior experience with the payor. We have established a reserve for uncollectible amounts based on estimates of what we will collect from a) third-party payors with whom we do not have a contractual arrangement or sufficient experience to accurately estimate the amount of reimbursement we will receive, b) co-payments directly from patients, and c) those procedures that are not covered by insurance or other third party payors. On December 31, 2007, our Allowance for Doubtful Accounts was approximately $414,500, a 301% increase from our balance at December 31, 2006 of $103,500. The allowance for doubtful accounts was approximately 11.3% and 6.5% of accounts receivables on December 31, 2007 and December 31, 2006, respectively. This increase was the result of an increase in Accounts Receivable due to increased revenues and the increase in the percentage of our aged accounts receivable greater than 120 days.

Cost of Revenue

During 2007, our cost of revenue, as a percentage of gross revenue, increased from 43% in 2006 to 48% in 2007. This was primarily a result of increases in the number of employees and related benefits as well as increased lab supply and postage/delivery costs from opening new lines of business and meeting the increase in testing volumes.

Gross Profit

As a result of the 78% increase in revenue and our 48% cost of revenue, our gross profit increased 61% to $5,982,000 in 2007, from a gross profit of $3,717,000 in 2006. When expressed as a percentage of revenue, our gross margins decreased from 57.4% in 2006 to 52.1% in 2007. The increase in gross profit was largely a result of higher testing volumes in 2007, and the decrease in gross profit margin was due to the increased costs in 2007 for employee labor and benefits, lab supplies, and postage and delivery costs.

General and Administrative Expenses

During 2007, our general and administrative expenses increased by approximately 155% to $9,123,000 from approximately $3,577,000 in 2006. General and administrative expenses, as a percentage of sales was 79% as of December 31, 2007, compared with 55% as of December 31, 2006, an increase of 24%. This increase was primarily a result of higher personnel and personnel-related expenses associated with the increase in management and sales and administrative headcount that was necessary to manage the significant increases in test volumes described above. In addition to management, sales, and administrative personnel, our general and administrative expenses also include all overhead and technology expenses as well, which have also increased as a result of higher test volumes. We also incurred significant expenses related to scaling our operations to meet our ongoing business plan and significant expenses associated with the litigation with US Labs that was recently settled (see Note L to our financial statements). For the year ended December 31, 2007, we incurred approximately $619,000 of litigation related expenses, net of reimbursements from our insurance company, as compared to approximately $159,000 of such litigation related expenses for the year ended December 31, 2006. Bad debt expense for the years ended December 31, 2007 and 2006 was $1,013,804 and $444,133, respectively. This increase was necessitated by the significant increase in revenues noted above and to a lesser extent by the issues denoted in our critical accounting policies regarding accounts receivable management.

Other Income/Expense

Net other income/expense, which primarily consists of interest expense, decreased approximately 11% in 2007 to approximately $239,000 from approximately $270,000 for 2006. Interest expense is comprised of interest payable on advances under our Credit Facility with Aspen and interest paid for capital lease obligations. The year-over-year decrease is primarily attributed to paying off the Aspen credit facility on June 7, 2007.

Net Loss

As a result of the foregoing, our net loss increased from ($130,000) in 2006 to ($3,380,000) in 2007, an increase of approximately 2,500%.

Liquidity and Capital Resources

During the fiscal year ended December 31, 2007, our operating activities used approximately $2,643,000 in cash compared with $694,000 used in the fiscal year ended 2006. This amount primarily represented cash tied-up in receivables as a result of increased revenues and to a lesser extent cash used to pay the expenses associated with our operations as well as fund our other working capital. We also spent approximately $516,000 on new equipment in 2007 compared with $399,000 in 2006. Through the sale of equity securities, which provided approximately $5,287,000, we were able to retire the $1,675,000 due on the Aspen Credit facility and finance operations. This resulted in net cash provided by financing activities of approximately $3,443,000 in 2007 compared to $1,208,000 in 2006. At December 31, 2007 and December 31, 2006, we had cash and cash equivalents of approximately $211,000, and $126,000 respectively.

On January 18, 2006, the Company entered into a binding letter agreement (the “Aspen Letter Agreement”) with Aspen, which provided, among other things, that:

(a) Aspen waived certain pre-emptive rights in connection with the sale of $400,000 of our Common Stock at a purchase price of $0.20 per/share and the granting of 900,000 warrants with an exercise price of $0.26 per/share to SKL Limited Partnership, LP (“SKL” as more fully described below) in exchange for five (5) year warrants to purchase 150,000 shares at an exercise price of $0.26 per/share (the “Waiver Warrants”).

(b) Aspen had the right, up to April 30, 2006, to purchase up to $200,000 of restricted shares of the Company’s Common Stock at a purchase price per share of $0.20 per/share (1,000,000 shares) and receive a five (5) year warrant to purchase 450,000 shares of the Company’s common stock at an exercise price of $0.26 per/share in connection with such purchase (the “Equity Purchase Rights”). On March 14, 2006, Aspen exercised its Equity Purchase Rights.

(c) Aspen and the Company amended the Loan Agreement (the “Credit Facility Amendment”), dated March, 2005 to extend the maturity date until September 30, 2007, and to modify certain covenants. In addition, Aspen had the right, through April 30, 2006, to provide the Company up to $200,000 of additional secured indebtedness to the Company under the Credit Facility Amendment and to receive a five year warrant to purchase up to 450,000 shares of the Company’s Common Stock with an exercise price of $0.26 per/share (the “New Debt Rights”). On March 30, 2006, Aspen exercised its New Debt Rights and entered into the definitive transaction documentation for the Credit Facility Amendment and other such documents required under the Aspen Agreement.

(d) The Company agreed to amend and restate the warrant agreement, dated March 23, 2005, which more formally implemented the original agreement made on February 18, 2005 with respect to such warrants, to provide that all 2,500,000 warrant shares (the “Existing Warrants”) were vested and the exercise price per share was reset to $0.31 per share. The difference, between the value of the warrants on the original February, 18, 2005 measurement date which was calculated using an exercise price of $0.50 per/share, and their value on the January 18, 2006 modification date which was calculated using an exercise price of $0.31 per/share, amounted to $2,365 and, was credited to additional paid-in capital and included in deferred financing fees.

(e) The Company agreed to amend the Registration Rights Agreement, dated March 23, 2005 (the “Registration Rights Agreement”), between the parties to incorporate the Initial Warrants, the Waiver Warrants and any new shares or warrants issued to Aspen in connection with the Equity Purchase Rights or the New Debt Rights.

(f) All Waiver Warrants, the Existing Warrants and all warrants issued to Aspen and SKL in connection with the purchase of equity or debt securities are exercisable at the option of the holder for a term of five years, and each such warrant contains provisions that allow for a physical exercise, a net cash exercise or a net share settlement. We used the Black-Scholes pricing model to estimate the fair value of all such warrants as of the date of issue for each, using the following approximate assumptions: dividend yield of 0 %, expected volatility of 14.6 – 19.3% (depending on the date of agreement), risk-free interest rate of 4.5%, and a term expected life of 3 - 5 years.

The Aspen Credit Facility was paid in full in June 2007 and it expired on September 30, 2007.

During the period from January 18 through 21, 2006, the Company entered into agreements with four (4) other shareholders who are parties to a Shareholders’ Agreement, dated March 23, 2005, to exchange five (5) year warrants to purchase an aggregate of 150,000 shares of stock at a purchase price of $0.26 per/share for such shareholders’ waiver of their pre-emptive rights under the Shareholders’ Agreement.

On January 21, 2006 the Company entered into a subscription agreement (the “Subscription”) with SKL Family Limited Partnership, LP, a New Jersey limited partnership, whereby SKL purchased 2.0 million shares (the “Subscription Shares”) of the Company’s Common Stock at a purchase price of $0.20 per/share for $400,000. Under the terms of the Subscription, the Subscription Shares are restricted for a period of twenty-four (24) months and then carry piggyback registration rights to the extent that exemptions under Rule 144 are not available to SKL. In connection with the Subscription, the Company also issued a five (5) year warrant to purchase 900,000 shares of the Company’s Common Stock at an exercise price of $0.26 per/share. SKL has no previous affiliation with the Company.

On June 6, 2005, we entered into a Standby Equity Distribution Agreement (the “SEDA”) with Cornell Capital Partners, LP. Pursuant to the SEDA, the Company could, at its discretion, periodically sell to Cornell Capital Partners, LP shares of common stock for a total purchase price of up to $5.0 million. On August 1, 2007, the SEDA expired and we decided not to renew it.

The following sales of common stock were made under our SEDA with Cornell Capital Partners LP since it was first declared effective on August 1, 2005:

Request Date	Completion Date	Shares of Common Stock		Gross Proceeds		Yorkville Fee		Escrow Fee		Net Proceeds		ASP(1)

8/29/2005	9/8/2005		63,776	$	25,000	$	1,250	$	500	$	23,250

12/10/2005	12/18/2005		241,779		50,000		2,500		500		47,000

Subtotal – 2005			305,555	$	75,000	$	3,750	$	1,000	$	70,250	$	0.25

7/19/2006	7/28/2006		83,491		53,000		2,500		500		50,000

8/8/2006	8/16/2006		279,486		250,000		12,500		500		237,000

10/18/2006	10/23/2006		167,842		200,000		10,000		500		189,500

Subtotal – 2006			530,819	$	503,000	$	25,000	$	1,500	$	476,500	$	0.95

12/29/2006	1/10/2007		98,522		150,000		7,500		500		142,000

1/16/2007	1/24/2007		100,053		150,000		7,500		500		142,000

2/1/2007	2/12/2007		65,902		100,000		5,000		500		94,500

2/19/2007	2/28/2007		166,611		250,000		12,500		500		237,000

2/28/2007	3/7/2007		180,963		250,000		12,500		500		237,000

4/5/2007	4/16/2007		164,777		250,000		12,500		500		237,000

4/20/2007	4/30/2007		173,467		250,000		12,500		500		237,000

Subtotal – 2007			950,295	$	1,400,000	$	70,000	$	3,500	$	1,326,500	$	1.48

Total Since Inception			1,786, 669	$	1,978,000	$	98,750	$	6,000	$	1,873,250	$	1.19

(1)	Average Selling Price of shares issued.

During the period from May 31, 2007 through June 6, 2007, we sold 2,666,667 shares of our Common Stock to ten unaffiliated accredited investors (the “Investors”) at a price of $1.50 per share in a private placement of our Common Stock (the “Private Placement”). The Private Placement generated gross proceeds to the Company of $4.0 million, and after estimated transaction costs, the Company received net cash proceeds of approximately $3.8 million. The Company also issued warrants to purchase 98,417 shares of our Common Stock to Noble, in consideration for its services as a placement agent for the Private Placement and paid Noble a cash fee of $147,625. Additionally, the Company issued to Aspen Capital Advisors, LLC (“ACA”) warrants to purchase 250,000 shares at $1.50 per share and paid ACA a cash fee of $52,375 in consideration for ACA’s services to the Company in connection with the Private Placement. The Private Placement involved the issuance of the aforementioned unregistered securities in transactions that we believed were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). All of the aforementioned stockholders received registration rights (“Registration Rights”) for the Private Placement shares so purchased and we filed a registration

statement on Form SB-2 on July 12, 2007 to register these shares (the “Registration Statement”). Certain of the Investors also purchased 1,500,000 shares and 500,000 warrants from Aspen in a separate transaction that occurred simultaneously with the Private Placement and the Company agreed to an assignment of Aspen’s registration rights for such shares and warrants, and those shares and warrants were included in this Registration Statement.

The Registration Rights contained a provision that if the Registration Statement was not declared effective within 120 days of the Private Placement, we would be responsible for partial relief of the damages resulting from a holder’s inability to sell the shares covered by the Registration Statement. Beginning after 120 days from the date that the Private Placement was consummated, the Company is obligated to pay as liquidated damages to each holder of shares covered by the Registration Statement (“Registered Securities”) an amount equal to one half percent (0.5%) of the purchase price of the Registered Securities for each thirty (30) day period that the Registration Statement is not effective after the required effective date specified in the Registration Rights Agreement. Such liquidated damages may be paid, at the holder’s option, either in cash or shares of our Common Stock, after demand therefore has been made.

In August, 2007, we received a comment letter from the Accounting Staff of the SEC regarding certain disclosure and accounting questions with respect to our FY 2006 annual report filed on Form 10-KSB. In September 2007, we responded to the SEC Staff and filed an amended Form 10-KSB/A that responded to the matters raised by the Staff. In October 2007, we received a follow up comment letter from the Staff that continued to question the accounting we use in connection with non-cash employee stock-based compensation and warrants issued under the newly adopted SFAS 123(R). We responded to the Staff’s October 2007 letter in March 2008, and resolved all open issues in May 2008.

As a result of the aforementioned SEC correspondence, the Company was not able to register the securities issued in the Private Placement within the allowed 120 period, and was thus responsible for damages. Accordingly, as of December 31, 2007, in accordance with FASB Staff Position 00-19-2, “Accounting for Registration Payment Arrangements” we have accrued approximately $282,000 in penalties as liquidated damages for the period from the end of the 120 day period through May 2008. Such penalties are included in Accrued Expenses and Other Liabilities.

On June 6, 2007, the Company issued to Lewis Asset Management (“LAM”) 500,000 shares of Common Stock at a purchase price of $0.26 per share and received gross proceeds of $130,000 upon the exercise by LAM of 500,000 warrants which were purchased by LAM from Aspen on that day.

On June 7, 2007, we used part of the net proceeds of the Private Placement to pay off the $1.7 million principal balance of the Aspen Credit Facility.

On August 15, 2007 our Board of Directors voted to issue warrants to purchase 533,334 shares of our Common Stock to the investors who purchased shares in the Private Placement. Such warrants have an exercise price of $1.50 per share and are exercisable for a period of two years. Such warrants also have a provision for piggyback registration rights in the first year and demand registration rights in the second year.

On February 1, 2008, we entered into a Revolving Credit and Security Agreement (“Credit Facility” or “Credit Agreement”) with CapitalSource Finance LLC (“Lender”) pursuant to which the Lender shall make available to us a revolving credit facility in a maximum principal amount at any time outstanding of up to Three Million Dollars ($3,000,000) (the “Facility Cap”). Subject to the provisions of the Credit Agreement, the Lender shall make advances to us from time to time during the three (3) year term following the closing date, and the revolving Credit Facility may be drawn, repaid and redrawn from time to time as permitted under the Credit Agreement. Interest on outstanding advances under the Credit Facility shall be payable monthly in arrears on the first day of each calendar month at an annual rate of one-month LIBOR plus 3.25% in accordance with the terms of the Credit Agreement, subject to a LIBOR floor of 3.14%. As of March 31, 2008, the effective annual interest rate of the Agreement was 6.39%. To secure the payment and performance in full of the Obligations (as defined in the Credit Agreement), we granted to the Lender a continuing security interest in and lien upon, all of our rights, title and interest in and to our Accounts (as such term is defined in the Credit Agreement), which primarily consist of accounts receivable. Furthermore, pursuant to the Credit Agreement, the Parent Company guaranteed the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all of our obligations. The Parent Company’s guaranty is a continuing guarantee and shall remain in force and effect until the indefeasible cash payment in full of the Guaranteed Obligations (as defined in the Credit Agreement) and all other amounts payable under the Credit Agreement.

At the present time, we anticipate that based on our current business plan and operations, our existing cash balances, the availability of our accounts receivable line with Capital Source, and loans from our directors that we will have adequate cash for at least the next twelve months. This estimate of our cash needs does not include any additional funding which may be required for growth in our business beyond that which is planned, strategic transactions or acquisitions. In the event that the Company grows faster than we currently anticipate or we engage in strategic transactions or acquisitions and our cash on hand and/or our availability under the Capital Source Credit Facility or other loans from our directors is not sufficient to meet our financing needs, we may need to raise additional capital from other resources. In such event, the Company may not be able to obtain such funding on attractive terms or at all and the Company may be required to curtail its operation. In the event that we do need to raise additional capital, we would seek to raise this additional money through issuing a combination of debt and/or equity securities primarily to banks and/or other large institutional investors. On March 31, 2008, we had $330,358 in cash on hand and approximately $1,036,000 of availability under our Credit Facility.

Recent Accounting Pronouncements

In February 2007 the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159”). SFAS 159 provides companies with an option to irrevocably elect to measure certain financial assets and financial liabilities at fair value on an instrument-by-instrument basis with the resulting changes in fair value recorded in earnings. The objective of SFAS 159 is to reduce both the complexity in accounting for financial instruments and the volatility in earnings caused by using different measurement attributes for financial assets and financial liabilities. SFAS 159 became effective for the Company as of January 1, 2008 and as of this effective date, the Company has elected not to apply the fair value option to any of its financial assets for financial liabilities.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides a new single authoritative definition of fair value and provides enhanced guidance for measuring the fair value of assets and liabilities and requires additional disclosures related to the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 is effective for the Company as of January 1, 2008 for financial assets and financial liabilities within its scope and it is not expected to have a material impact on its consolidated financial statements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”) which defers the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years for items within the scope of FSP FAS 157-2. The Company is currently assessing the impact, if any, of SFAS 157 and FSP FAS 157-2 for non-financial assets and non-financial liabilities on its consolidated financial statements.

US Labs Settlement

On April 23, 2008, the Company and US Labs entered into the Settlement Agreement; whereby, both parties agreed to settle and resolve all claims asserted in and arising out of US Labs’ lawsuit against the Company and certain of its officers and employees. Pursuant to the Settlement Agreement, we are required to pay $500,000 to US Labs, of which $250,000 was paid on May 1, 2008 with funds from the Company’s insurance carrier and the remaining $250,000 shall be paid by the Company on the last day of each month in equal installments of $31,250 commencing on May 31, 2008. Under the terms of the Settlement Agreement, there are certain provisions agreed to in the event of default.

Employment Contracts

On March 12, 2008, we entered into an employment agreement with Robert Gasparini, our President and Chief Scientific Officer to extend his employment with the Company for an additional four year term. This employment agreement was retroactive to January 1, 2008 and provides that it will automatically renew after the initial four year term for one year increments unless either party provides written notice to the other party with their intention to terminate the agreement 90 days before the end of the initial term. The employment agreement specifies an initial base salary of $225,000/year with specified salary increases tied to meeting revenue goals. Mr. Gasparini is also entitled to receive cash bonuses for any given fiscal year in an amount equal to 30% of his base salary if he meets certain targets established by the Board of Directors. In addition, Mr. Gasparini was granted 784,000 stock options that have a seven year term so long as Mr. Gasparini remains an employee of the Company. These options are scheduled to vest according to the passage of time and the meeting of certain performance-based milestones. Mr. Gasparini’s employment agreement also specifies that he is entitled to four weeks of paid vacation per year and other insurance benefits. In the event that Mr. Gasparini is terminated without cause by the Company, the Company has agreed to pay Mr. Gasparini’s base salary and maintain his employee benefits for a period of twelve months.

DESCRIPTION OF BUSINESS

a) cytogenetics testing, which analyzes human chromosomes;

b) Fluorescence In-Situ Hybridization (FISH) testing, which analyzes abnormalities at the chromosomal and gene levels;

c) flow cytometry testing, which analyzes gene expression of specific markers inside cells and on cell surfaces; and

d) molecular testing which involves analysis of DNA and RNA to diagnose and predict the clinical significance of various genetic sequence disorders.

All of these testing services are widely utilized in the diagnosis and prognosis of various types of cancer.

The medical testing laboratory market can be broken down into three primary segments:

clinical lab testing,

anatomic pathology testing, and

genetic and molecular testing.

AP testing involves evaluation of tissue, as in surgical pathology, or cells as in cytopathology. The most widely performed AP procedures include the preparation and interpretation of pap smears, skin biopsies, and tissue biopsies.

Genetic and molecular testing typically involves analyzing chromosomes, genes or base pairs of DNA or RNA for abnormalities. New tests are being developed at an accelerated pace, thus this market niche continues to expand rapidly. Genetic and molecular testing requires highly specialized equipment and credentialed individuals (typically MD or PhD level) to certify results and typically yields the highest average revenue per test of the three market segments. The estimated size of this market is $4-5 Billion and growing at an annual rate of greater than 25%.

NeoGenomics’, primary focus is to provide high complexity laboratory testing for the community-based pathology and oncology marketplace. Within these key market segments, we currently provide our services to pathologists and oncologists in the United States that perform bone marrow and/or peripheral blood sampling for the diagnosis of blood and lymphoid tumors (leukemias and lymphomas) and archival tissue referral for analysis of solid tumors such as breast cancer. A secondary strategic focus targets community-based urologists due to the availability of UroVysion®, a FISH-based test for the initial diagnosis of bladder cancer and early detection of recurrent disease. We focus on community-based practitioners for two reasons: First, academic pathologists and associated clinicians tend to have their testing needs met within the confines of their university affiliation. Secondly, most of the cancer care in the United States is administered by community based practitioners, not in academic centers, due to ease of local access. Moreover, within the community-based pathologist segment it is not our intent to willingly compete with our customers for testing services that they may seek to perform themselves. Fee-for-service pathologists for example, derive a significant portion of their annual revenue from the interpretation of biopsy specimens. Unlike other larger laboratories, which strive to perform 100% of such testing services themselves, we do not compete with our customers for such specimens. Rather, our high complexity cancer testing focus is a natural extension of and complementary to many of the services that our community-based customers often perform within their own practices. As such, we believe our relationship as a non-competitive consultant, empowers these physicians to expand their testing breadth and provide a menu of services that matches or exceeds the level of service found in academic centers of excellence around the country.

We continue to make progress growing our testing volumes and revenue beyond our historically focused effort in Florida due to our expanding field sales footprint. As of May 15, 2008, NeoGenomics’ sales and marketing organization totaled 14 individuals, and we have received business from 26 states throughout the country. Recent, key hires included various territory business managers (sales representatives) in the Northeastern, Southeastern, and Western states. We intend to continue to add additional sales and marketing personnel throughout FY 2008. As more sales representatives are added, we believe that the base of our business outside of Florida will continue to grow and ultimately eclipse that which is generated within the state.

We believe NeoGenomics average 3-5 day turn-around time for our cytogenetics services continues to remain an industry-leading benchmark for national laboratories. The timeliness of results continues to increase the usage patterns of cytogenetics and act as a driver for other add-on testing requests by our referring physicians. Based on anecdotal information, we believe that typical cytogenetics labs have 7-14 day turn-around times on average with some labs running as high as 21 days. Traditionally, longer turn-around times for cytogenetics tests have resulted in fewer FISH and other molecular tests being ordered since there is an increased chance that the test results will not be returned within an acceptable diagnostic window when other adjunctive diagnostic test results are available. We believe our turn-around times result in our referring physicians requesting more of our testing services in order to augment or confirm other diagnostic tests, thereby giving us a significant competitive advantage in marketing our services against those of other competing laboratories.

In 2007 we continued an aggressive campaign to regionalize our laboratory operations around the country to be closer to our customers. High complexity laboratories within the cancer testing niche have frequently operated a core facility on one or both coasts to service the needs of their customers around the country. Informal surveys of customers and prospects uncovered a desire to do business with a laboratory with national breadth but with a more local presence. In such a scenario, specimen integrity, turnaround-time of results, client service support, and interaction with our medical staff are all enhanced. In 2007, NeoGenomics operated three laboratory locations in Fort Myers, FL; Irvine, CA; and Nashville TN, each of which received the appropriate state, Clinical Laboratory Improvement Amendments (CLIA), and College of American Pathologists (CAP) licenses and accreditations. As situations dictate and opportunities arise, we will continue to develop and open new laboratories, seamlessly linked together by our optimized Laboratory Information System (LIS), to better meet the regionalized needs of our customers.

2007 also brought progress in the NeoGenomics Contract Research Organization (“CRO”) division based at our Irvine, CA facility. This division was created to take advantage of our core competencies in genetic and molecular high complexity testing and act as a vehicle to compete for research projects and clinical trial support contracts in the biotechnology and pharmaceutical industries. The CRO division will also act as a development conduit for the validation of new tests which can then be transferred to our clinical laboratories and be offered to our clients. We envision the CRO as a way to infuse some intellectual property into the mix of our services and in time create a more “vertically integrated” laboratory that can potentially offer additional clinical services of a more proprietary nature. 2007 brought the first revenue to NeoGenomics’ CRO division. This initial revenue stream was small due to the size of the contracts closed. In 2008, we hope to expand on our CRO revenue stream with more and larger contracts.

As NeoGenomics grows, we anticipate offering additional tests that broaden our focus from genetic and molecular testing to more traditional types of anatomic pathology testing (i.e. immunohistochemistry) that are complementary to our current test offerings. At no time do we expect to intentionally compete with fee-for-service pathologists for services of this type and Company sales efforts will operate under a strict “right of first refusal” philosophy that supports rather than undercuts the practice of community-based pathology. We believe that by adding additional types of tests to our product offering we will be able to capture increases in our testing volumes through our existing customer base as well as more easily attract new customers via the ability to package our testing services more appropriately to the needs of the market.

	FY 2007		FY 2006		% Inc (Dec)

Customer Requisitions Received (Cases)		16,385		9,563		71.3	%
Number of Tests Performed		20,998		12,838		63.6	%
Average Number of Tests/Requisition		1.28		1.34		(4.5	%)

Total Testing Revenue	$	11,504,725	$	6,475,996		77.7	%
Average Revenue/Requisition		702.15	$	677.19		3.7	%
Average Revenue/Test		547.90	$	504.44		8.6	%

Business of NeoGenomics

Services

We currently offer four primary types of testing services: cytogenetics, flow cytometry, FISH testing and molecular testing.

Cytogenetics Testing. Cytogenetics testing involves analyzing chromosomes taken from the nucleus of cells and looking for abnormalities in a process called karyotyping. A karyotype evaluates the entire 46 human chromosomes by number and banding patterns to identify abnormalities associated with disease. In cytogenetics testing, we typically analyze chromosomes from 20 different cells. Examples of cytogenetics testing at NeoGenomics include bone marrow aspirate or peripheral blood analysis to diagnose various types of leukemias and lymphomas.

Cytogenetics testing by large national reference laboratories and other competitors has historically taken anywhere from 7-14 days on average to obtain a complete diagnostic report. We believe that as a result of this timeframe, many practitioners have refrained to some degree from ordering such tests because the results traditionally were not returned within an acceptable diagnostic window. NeoGenomics has designed our laboratory operations in order to complete cytogenetics tests for most types of biological samples, produce a final diagnostic report and make it available via fax or online viewing within 3-5 days. We have consistently delivered these turnaround times over the last three years without taking shortcuts that can undermine the quality of the delivered result. These turnaround times are among the best in the industry and we believe that more physicians are incorporating cytogenetics testing into their diagnostic regimens, thus affording NeoGenomics the opportunity to drive the incremental growth of our business via this product line for the foreseeable future.

Flow Cytometry Testing. Flow cytometry testing analyzes clusters of differentiation on cell surfaces. Gene expression of many cancers creates protein-based clusters of differentiation on the cell surfaces that can then be traced back to a specific lineage or type of cancer. Flow cytometry is a method of separating liquid specimens or disaggregated tissue into different constituent cell populations. This methodology is used to determine which of these cell types is abnormal in a patient specific manner. Flow cytometry is important in developing an accurate diagnosis, defining the patient’s prognosis, and clarifying what treatment options may be optimal. Flow cytometry testing is performed using sophisticated lasers and will typically analyze over 100,000 individual cells in an automated fashion. Flow cytometry testing is highly complementary with cytogenetics and the combination of these two testing methodologies allows the results from one test to complement the findings of the other methodology, which can lead to a more accurate snapshot of a patient’s disease state.

FISH Testing. As an adjunct to traditional chromosome analysis, we offer Fluorescence In Situ Hybridization (FISH) testing to extend our capabilities beyond routine cytogenetics. FISH testing permits identification of the most frequently occurring numerical chromosomal abnormalities in a rapid manner by looking at centromeres or specific genes that are implicated in cancer. During the past 5 years, FISH testing has demonstrated its considerable diagnostic potential. The development of molecular probes by using DNA sequences of differing sizes, complexity, and specificity, coupled with technological enhancements (direct labeling, multicolor probes, computerized signal amplification, and image analysis) make FISH a powerful and diagnostic and prognostic tool.

Molecular Testing. Molecular testing primarily involves the analysis of DNA to diagnose DNA & RNA abnormalities in liquid and solid tumors. There are approximately 1.0 – 2.0 million base pairs of DNA in each of the estimated 20,000 genes located across the 46 chromosomes in the nucleus of every cell. Molecular testing allows us to look for variations in this DNA that are associated with specific types of diseases. Today there are molecular tests for about 500 genetic diseases. However, the majority of these tests remain available under the limited research use only designation and are only offered on a restricted basis to family members of someone who has been diagnosed with a genetic condition. About 50 molecular tests are now available for the diagnosis, prognosis or monitoring of various types of cancers and physicians are becoming more comfortable ordering such adjunctive tests. We currently provide these tests on an outsourced basis. We anticipate in the near future performing some of the more popular tests within our facilities as the number of requests continues to increase. Although reimbursement rates for these new molecular tests still need to improve, we believe that molecular testing is an important and growing market segment with many new diagnostic tests being developed every year. We are committed to providing the latest and most accurate testing to clients and we will invest accordingly when market demand warrants.

Distribution Methods

The Company currently performs testing services at each of its’ three main clinical laboratory locations: Fort Myers, FL, Nashville, TN and Irvine, CA, and then produces a report for the requesting physician. The Company currently out sources all of its molecular testing to third parties, but expects to validate some of this testing in-house in FY 2008 and offer it to customers to best meet client demand.

Competition

We are engaged in segments of the medical testing laboratory industry that are highly competitive. Competitive factors in the genetic and molecular testing business generally include reputation of the laboratory, range of services offered, pricing, convenience of sample collection and pick-up, quality of analysis and reporting and timeliness of delivery of completed reports.

Our competitors in the United States are numerous and include major medical testing laboratories and biotechnology research companies. Many of these competitors have greater financial resources and production capabilities. These companies may succeed in developing service offerings that are more effective than any that we have or may develop and may also prove to be more successful than we are in marketing such services. In addition, technological advances or different approaches developed by one or more of our competitors may render our products obsolete, less effective or uneconomical.

We estimate that the United States market for genetics and molecular testing is divided among approximately 300 laboratories. However, approximately 80% of these laboratories are attached to academic institutions and only provide clinical services to their affiliate university hospitals. We further believe that less than 20 laboratories market their services nationally. We believe that the industry as a whole is still quite fragmented, with the top 20 laboratories accounting for approximately 50% of market revenues.

We intend to continue to gain market share by offering industry leading turnaround times, a broad service menu, high-quality test reports, and enhanced post-test consultation services. In addition, we have a fully integrated and interactive internet-enabled Laboratory Information System that enables us to report real time results to customers in a secure environment.

Suppliers

The Company orders its laboratory and research supplies from large national laboratory supply companies such as Fisher Scientific, Inc., Invitrogen and Beckman Coulter and does not believe any disruption from any one of these suppliers would have a material effect on its business. The Company orders the majority of its FISH probes from Abbott Laboratories and as a result of their dominance of that marketplace and the absence of any competitive alternatives, if they were to have a disruption and not have inventory available it could have a material effect on our business. This risk cannot be completely offset due to the fact that Abbott Laboratories has patent protection which limits other vendors from supplying these probes.

Dependence on Major Customers

We currently market our services to pathologists, oncologists, urologists, hospitals and other clinical laboratories. During 2007, we performed 20,998 individual tests. Ongoing sales efforts have decreased dependence on any given source of revenue. Notwithstanding this fact, several key customers still account for a disproportionately large case volume and revenues. Accordingly, for the year ended December 31, 2007, one customer accounted for 25% of total revenue and all others were less than 10% of total revenue individually. During the year ended December 31, 2006, three customers accounted for 26%, 18% and 17% of total revenue, respectively. In the event that we lost one of these customers, we would potentially lose a significant percentage of our revenues. For the year ended December 31, 2007, Medicare and one commercial insurance provider accounted for 44% and 10% of the Company’s total accounts receivable balance, respectively.

Trademarks

The “NeoGenomics” name and logo has been trademarked with the United States Patent and Trademark Office.

Number of Employees

As of December 31, 2007, we had ninety-two full-time employees. In addition, our Acting Principal Financial Officer and two pathologists serve as consultants to the Company on a part-time basis. On December 31, 2006, we had forty-eight employees. Our employees are not represented by any union and we believe our employee relations are good.

As of March 31, 2008, we had ninety full-time employees.

Government Regulation

Our business is subject to government regulation at the federal, state and local levels, some of which regulations are described under “Clinical Laboratory Operations,” “Anti-Fraud and Abuse Laws,” “The False Claims Act,” and “Confidentiality of Health Information” below.

Clinical Laboratory Operations

Licensure and Accreditation

The Company operates clinical laboratories in Fort Myers, FL, Nashville, TN, and Irvine, CA. All locations have obtained CLIA licensure under the federal Medicare program, the Clinical Laboratories Improvement Act of 1967 and the Clinical Laboratory Amendments of 1988 (collectively “CLIA ‘88”) as well as state licensure as required in FL, TN, and CA. CLIA ‘88 provides for the regulation of clinical laboratories by the U.S. Department of Health and Human Services (“HHS”). Regulations promulgated under the federal Medicare guidelines, CLIA ‘88 and the clinical laboratory licensure laws of the various states affect our testing laboratories. All locations are also accredited by the College of American Pathologists and actively participate in CAP’s proficiency testing programs and educational challenges for all tests offered by the Company. Proficiency testing programs involve actual testing of specimens that have been prepared by an entity running an approved program for testing by a clinical laboratory.

The federal and state certification and licensure programs establish standards for the operation of clinical laboratories, including, but not limited to, personnel and quality control. Compliance with such standards is verified by periodic inspections by inspectors employed by federal or state regulatory agencies as well as routine internal inspections conducted by the Company’s Quality Assurance team which is comprised of representatives of all departments of the Company.

Quality of Care

The quality of care provided by the Company to its customers is of paramount importance to the Company and a distinct differentiator from many of our competitors. As such, all employees are committed to providing accurate, reliable, and consistent services at all times. Any concerns regarding the quality of testing or services provided by the Company are immediately communicated to Company management and if necessary, the Compliance Department, or Human Resources Department. All employees are responsible for the Company’s commitment to quality and immediately communicating activities that do not support quality.

Compliance Program

The healthcare industry is one of the most highly regulated industries with respect to federal and state oversight of Fraud, Waste, and Abuse. As such the Company has implemented a Compliance Program that is overseen by the senior management of the Company (collectively the “Compliance Committee”) to assure compliance with the vast regulations and governmental guidance. Our program consists of training / education of the employees and monitoring / audits of Company practices. The Company actively discusses with the Board of Directors any Compliance related findings as well as any Compliance related issues that may have material effect on the Company.

Hotline

The Company provides a Hotline for employees who wish to anonymously or confidentially report suspected violations of our codes of conduct, policies/procedures, or laws and regulations. Employees are strongly encouraged to report any suspected violation if they do not feel the problem can be appropriately addressed through the normal chain of command. The Hotline does not replace other resources available to Employees, including supervisors, managers and human resources staff, but is an alternate channel available 24 hours a day, 365 days a year. The Company does not allow any retaliation against an employee who reports a compliance related issue in good faith.

Anti-Fraud and Abuse Laws

In January 1990, following a study of pricing practices in the clinical laboratory industry, the Office of the Inspector General (“OIG”) of HHS issued a report addressing how these pricing practices relate to Medicare and Medicaid. The OIG reviewed the industry’s use of one fee schedule for physicians and other professional accounts and another fee schedule for patients/third-party payors, including Medicare, in billing for testing services, and focused specifically on the pricing differential when profiles (or established groups of tests) are ordered.

Existing federal law authorizes the Secretary of HHS to exclude providers from participation in the Medicare and Medicaid programs if they charge state Medicaid programs or Medicare fees “substantially in excess” of their “usual and customary charges.” On September 2, 1998, the OIG issued a final rule in which it indicated that this provision has limited applicability to services for which Medicare pays under a Prospective Payment System or a fee schedule, such as anatomic pathology services and clinical laboratory services. In several Advisory Opinions, the OIG has provided additional guidance regarding the possible application of this law, as well as the applicability of the anti-kickback laws to pricing arrangements. The OIG concluded in a 1999 Advisory Opinion that an arrangement under which a laboratory offered substantial discounts to physicians for laboratory tests billed directly to the physicians could potentially trigger the “substantially in excess” provision and might violate the anti-kickback law, because the discounts could be viewed as being provided to the physician

in exchange for the physician’s referral to the laboratory of non-discounted Medicare business, unless the discounts could otherwise be justified. The Medicaid laws in some states also have prohibitions related to discriminatory pricing.

Under another federal law, known as the “Stark” law or “self-referral prohibition,” physicians who have an investment or compensation relationship with an entity furnishing clinical laboratory services (including anatomic pathology and clinical chemistry services) may not, subject to certain exceptions, refer clinical laboratory testing for Medicare patients to that entity. Similarly, laboratories may not bill Medicare or Medicaid or any other party for services furnished pursuant to a prohibited referral. Violation of these provisions may result in disallowance of Medicare and Medicaid claims for the affected testing services, as well as the imposition of civil monetary penalties and application of False Claims submissions penalties. Some states also have laws similar to the Stark law.

The False Claims Act

The Civil False Claims Act originally enacted in 1863 and subsequently amended several times pertains to any federally funded program and defines “Fraudulent” as: knowingly submitting a false claim, i.e. actual knowledge of the falsity of the claim, reckless disregard or deliberate ignorance of the falsity of the claim. These are the claims to which criminal penalties are applied. Penalties include permissive exclusion in federally funded programs by Center for Medicare Services (“CMS”) as well as $11,500 plus treble damages per false claim submitted, and can include imprisonment. High risk areas include but are not limited to accurate use and selection of CPT codes, ICD-9 codes provided by the ordering physician, billing calculations, performance and billing of reported testing, use of reflex testing, and accuracy of charges at fair market value.

We will seek to structure our arrangements with physicians and other customers to be in compliance with the Anti-Kickback Statute, Stark Law, State laws, and the Civil False Claims Act and to keep up-to-date on developments concerning their application by various means, including consultation with legal counsel. However, we are unable to predict how these laws will be applied in the future, and the arrangements into which we enter could become subject to scrutiny there under.

In February 1997 (as revised in August 1998), the OIG released a model compliance plan for laboratories that is based largely on corporate integrity agreements negotiated with laboratories that had settled enforcement action brought by the federal government related to allegations of submitting false claims. We believe that we comply with the aspects of the model plan that we deem appropriate to the conduct of our business.

Confidentiality of Health Information

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) contains provisions that affect the handling of claims and other patient information that are, or have been used or disclosed by healthcare providers. These provisions, which address security and confidentiality of PHI (Protected Health Information or “patient information”) as well as the administrative aspects of claims handling, have very broad applicability and they specifically apply to healthcare providers, which include physicians and clinical laboratories. Rules implementing various aspects of HIPAA are continuing to be developed. The HIPAA Rules include the following components which have already been implemented at our locations and industry wide: The Privacy Rule which granted patients rights regarding their information also pertains to the proper uses and disclosures of PHI by healthcare providers in written and verbal formats required implementation no later than April 14, 2003 for all covered entities except small health plans which had another year for implementation. The Electronic Health Care Transactions and Code Sets Standards which established standard data content and formats for submitting electronic claims and other administrative healthcare transactions required implementation no later than October 16, 2003 for all covered entities. On April 20, 2005, CMS required compliance with the Security Standards which established standards for electronic uses and disclosures of PHI for all covered entities except small health plans who had an additional year to meet compliance. Currently, the industry, including all of our locations, is working to comply with the National Provider Identification number to replace all previously issued provider (organizational and individual) identification numbers. This number is being issued by CMS and must be used on all covered transactions after May 30, 2007 by all covered entities except small health plans which have an additional year to meet compliance with this rule.

In addition to the HIPAA rules described above, we are subject to state laws regarding the handling and disclosure of patient records and patient health information. These laws vary widely, and many states are passing new laws in this area. Penalties for violation include sanctions against a laboratory’s licensure as well as civil or criminal penalties. We believe we are in compliance with current state law regarding the confidentiality of health information and continue to keep abreast of new or changing state laws as they become available.

Other

Our operations currently are, or may be in the future, subject to various federal, state and local laws, regulations and recommendations relating to data protection, safe working conditions, laboratory and manufacturing practices and the purchase, storage, movement, use and disposal of hazardous or potentially hazardous substances used in connection with our research work and manufacturing operations, including radioactive compounds and infectious disease agents. Although we believe that our safety procedures comply with the standards prescribed by federal, state and local regulations, the risk of contaminatio