Edgar Filing: NEOGENOMICS INC

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 our credit agreement with CapitalSource 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 Are Effectively Controlled By Existing Stockholders And Therefore Other Stockholders Will Not Be Able To Direct The Company

Effective voting control of the Company is held by a relatively small group of stockholders. These stockholders effectively retain control of our Board of Directors and determine all of our corporate actions. In addition, the Company and stockholders owning and/or having the right to vote 11,197,901 shares, or approximately 30.4% of the Company’s voting shares outstanding as of April 27, 2010, have executed a Shareholders’ Agreement that, among other provisions, gives Aspen Select Healthcare, LP (“Aspen”), our largest stockholder, the right to elect three out of the eight directors authorized for our Board and nominate one mutually acceptable independent director and Dr. Michael T. Dent, our founder, the right to nominate one director. Accordingly, it is anticipated that Aspen and other parties to the Shareholders’ Agreement will continue to have the ability to effectively elect a controlling number of the members of 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 OTC Bulletin Board or any other stock market on which we may be listed 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.

Risks Related To This Offering

The Sale Of Our Common Stock To Fusion Capital May Cause Dilution And The Sale Of The Shares Of Common Stock Acquired By Fusion Capital Could Cause The Price Of Our Common Stock To Decline

In connection with entering into the Purchase Agreement, we authorized the sale to Fusion Capital of up to 3,000,000 shares of our common stock. The number of shares ultimately offered for sale by Fusion Capital under this prospectus is dependent upon the number of shares purchased by Fusion Capital under the Purchase Agreement. The purchase price for the common stock to be sold to Fusion Capital pursuant to the Purchase Agreement will fluctuate based on the price of our common stock. Specifically, under the Purchase Agreement for purchases up to $50,000, the purchase price would be equal to the lesser of: (i) the lowest sale price of the Company’s common stock on the purchase date; or (ii) the average of the three lowest closing sale prices of the Company’s common stock during the twelve consecutive business days prior to the date of a purchase by Fusion Capital. The price at which the Company’s common stock would be purchased for purchases in excess of $50,000 will be the lesser of: (i) the lowest sale price of the Company’s common stock on the purchase date and (ii) the lowest purchase price (as described above) during the previous seven business days prior to the purchase date. Therefore, at the time of our sales to Fusion Capital, it is likely that the purchase price to Fusion Capital will be below the then market price.

All 3,417,500 shares registered in this offering related to the Fusion Capital transaction are expected to be freely tradable. It is anticipated that such shares will be sold over a period of up to 30 months from the date of this prospectus. Depending upon market liquidity at the time, a sale of shares under this offering at any given time could cause the trading price of our common stock to decline. Fusion Capital may ultimately purchase all, some or none of the 3,000,000 shares of common stock not yet issued but registered in this offering. Such shares may be sold by us to Fusion Capital at a sale price below the then market price of our shares which would be dilutive to the value of shares held by our other shareholders.

After Fusion Capital has acquired such shares, it may sell all, some or none of such shares. Under the Purchase Agreement, we have the right but not the obligation to sell more than the 3,000,000 shares to Fusion Capital. As of the date hereof, we do not currently have any plans or intent to sell to Fusion Capital any shares beyond the 3,000,000 shares offered hereby. However, if we elect to sell more than the 3,000,000 shares (which we have the right but not the obligation to do), we must first register such additional shares under the Securities Act before we can elect to sell such additional shares to Fusion Capital. In the event we elect to do so, this could cause substantial dilution to the ownership interests of our shareholders. The number of shares ultimately offered for sale by Fusion Capital is dependent upon the number of shares purchased by Fusion Capital under the Purchase Agreement. Moreover, the sale of a substantial number of shares of our common stock under this offering, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of our shares to Fusion Capital and the Purchase Agreement may be terminated by us at any time at our discretion without any further cost to us.

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 37,278,768 shares of common stock outstanding as of April 27, 2010 26,842,462 shares are freely tradable without restriction, unless held by our “affiliates”. The remaining 10,436,205 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 May Sell Their Shares Of Common Stock In The Market, Which Sales May Cause Our Stock Price To Decline

The selling stockholders may sell in the public market 6,500,000 shares of our common stock being registered in this offering. That means that up to 6,500,000 shares may be sold pursuant to this prospectus. Such sales may cause our stock price to decline.

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.

The Market Price Of Our Common Stock Is Highly Volatile

The market price of our common stock has been and is expected to continue to be highly volatile. Factors, including announcements of technological innovations by us or other companies, regulatory matters, new or existing products or procedures, concerns about our financial position, operating results, litigation, government regulation, developments or disputes relating to agreements, patents or proprietary rights, may have a significant impact on the market price of our common stock. In addition, potential dilutive effects of future sales of shares of common stock by stockholders and by the Company, including Fusion Capital and the other selling stockholders pursuant to this prospectus, and subsequent sale of common stock by the holders of warrants and options could have an adverse effect on the market price of our shares.

If Penny Stock Regulations Impose Restrictions On The Marketability Of Our Common Stock, The Ability Of Our Stockholders To Sell Shares Of Our Stock Could Be Impaired

The SEC has adopted regulations that generally define a "penny stock" to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share subject to certain exceptions. Exceptions include equity securities issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for more than three years, or (ii) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years, or (iii) average revenue of at least $6,000,000 for the preceding three years. Our common stock is currently trading at under $5.00 per share. Although we currently fall under one of the exceptions, if at a later time we fail to meet one of the exceptions, our common stock will be considered a penny stock. 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, among others, 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 resell 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 of Financial Condition and Results 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 6,500,000 shares of our common stock.

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
Fusion Capital Fund II, LLC(2)		417,500		1.1	%		3,417,500		0.0	%
Aspen Select Healthcare, LP(3)		11,666,155		28.9	%		2,130,364		20.6	%
Mary S. Dent(4)		2,489,162		6.6	%		553,488		4.4	%
Steven C. Jones(5)		12,786,362		31.4	%		238,826		22.0	%
Jones Network, LP(6)		107,143		*			107,143		0.0	%
Marvin E. Jaffe(7)		96,429		*			21,429		*
Steven C. Jones ROTH IRA(8)		16,422		*			18,750		*
Peter M. Peterson(9)		11,978,900		29.6	%		12,500		21.2	%

Total(10):		15,889,453		38.3	%		6,500,000		29.8	%

*	Less than one percent (1%).

(1)

Applicable percentage of ownership is based on 37,278,667 shares of our common stock outstanding as of April 27, 2010, together with securities exercisable or convertible into shares of common stock within sixty (60) days of April 27, 2010, 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)

Steven G. Martin and Joshua B. Scheinfeld, the principals of Fusion Capital, are deemed to be beneficial owners of all of the shares of common stock owned by Fusion Capital. Messrs. Martin and Scheinfeld have shared voting and disposition power over the shares being offered under this prospectus. As of the date hereof, 417,500 shares of our common stock have been previously acquired by Fusion Capital, consisting of 400,000 shares we issued to Fusion Capital as a commitment fee and 17,500 shares that were issued as an expense reimbursement. The Company may elect in its sole discretion to sell to Fusion Capital up to an additional 3,000,000 shares under the Purchase Agreement. Fusion Capital does not presently beneficially own those shares as determined in accordance with the rules of the SEC.

(3)

Aspen Select Healthcare, LP (“Aspen”) has direct ownership of 5,905,279 shares and has certain warrants to purchase 3,050,000 shares, all of which are exercisable within 60 days of April 27, 2010. Also includes 2,710,876 shares to which Aspen has received a voting proxy. The general partner of Aspen is Medical Venture Partners, LLC, an entity controlled by Steven C. Jones and Peter M. Peterson.

(4)

Mary S. Dent is the spouse of Dr. Michael T. Dent, our chairman and founder. Mrs. Dent has direct ownership of 1,016,170 shares which she received in a spousal transfer from Dr. Dent in February 2007. Mrs. Dent’s beneficial ownership also includes (i) 900,000 shares held in a trust for the benefit of Dr. Dent’s children (of which Dr. Dent and his attorney are the sole trustees), and (ii) warrants and options held by Dr. Dent which are exercisable within sixty days of April 27, 2010 to purchase 572,992 shares.

(5)

Steven C. Jones, Executive Vice President - Finance and director of the Company, has direct ownership of 391,164 shares and warrants exercisable within 60 days of April 27, 2010 to purchase an additional 127,298 shares. Totals for Mr. Jones also include (i) 129,412 shares owned by Aspen Opportunity Fund, LP, an investment partnership that Mr. Jones and Mr. Peterson control, (ii) 107,143 shares owned by Jones Network, LP, a family limited partnership that Mr. Jones controls, (iii) warrants exercisable within 60 days of April 27, 2010 to purchase 250,000 shares, that are owned by Aspen Capital Advisors, LLC, a company that Mr. Jones controls, (iv) warrants exercisable within 60 days of April 27, 2010 to purchase 83,333 shares that are owned by Gulf Pointe Capital, LLC, a company that Mr. Jones and Mr. Peterson control, and (v) 31,857 shares held in certain individual retirement and custodial accounts. In addition, as a managing member of the general partner of Aspen, he has the right to vote all shares controlled by Aspen, thus all shares and currently exercisable warrants owned by Aspen have been added to his total (see Note 3).

(6)	Jones Network, LP is a family limited partnership controlled by Steven C. Jones. The shares to be sold in this offering were received in a distribution from Aspen.

(7)	Marvin Jaffe, M.D. is a director of the Company. Dr. Jaffe’s beneficial ownership includes 21,429 shares and warrants to purchase 75,000 shares which are exercisable within 60 days of April 27, 2010.

(8)	The shares being sold in this offering were received in a distribution from Aspen.

(9)

Peter M. Peterson, a director of the Company, has direct ownership of warrants exercisable within 60 days of April 27, 2010 to purchase 100,000 shares. In addition, as a managing member of the general partner of Aspen, he has the right to vote all shares controlled by Aspen, thus all Aspen shares and currently exercisable warrants have been added to his total (see Note 3). Mr. Peterson’s beneficial ownership also includes (i) warrants exercisable within 60 days of April 27, 2010 to purchase an additional 83,333 shares that are owned by Gulf Pointe Capital, LLC, a company that Mr. Jones and Mr. Peterson control, and (ii) 129,412 shares owned by Aspen Opportunity Fund, LP, an investment partnership that Mr. Jones and Mr. Peterson control.

(10)	The total number of shares listed does not double count the shares that may be beneficially attributable to more than one person.

THE FUSION TRANSACTION

General

On November 5, 2008, the Company and Fusion Capital Fund II, LLC, an Illinois limited liability company (“Fusion Capital”), entered into a Common Stock Purchase Agreement (the “Purchase Agreement”), and a Registration Rights Agreement (the “Registration Rights Agreement”). Under the Purchase Agreement, Fusion Capital is obligated, under certain conditions, to purchase shares from us in an aggregate amount of $8.0 million from time to time over a thirty (30) month period. Under the terms of the Purchase Agreement, Fusion Capital has received a commitment fee consisting of 400,000 shares of our common stock. As of April 27, 2010, there were 37,278,667 shares outstanding 26,842,462 shares held by non-affiliates) excluding the 3,000,000 shares offered by Fusion Capital pursuant to this prospectus which it has not yet purchased from us. If all of such 3,000,000 shares offered hereby were issued and outstanding as of the date hereof, the 3,000,000 shares would represent 7.4% of the total common stock outstanding or 11.2% of the non-affiliates shares outstanding as of the date hereof.

Under the Purchase Agreement and the Registration Rights Agreement we are required to register and have included in the offering pursuant to this prospectus (1) 400,000 shares which have already been issued as a commitment fee, (2) 17,500 shares which we have issued to Fusion Capital as an expense reimbursement and (3) at least 3,000,000 shares which we may sell to Fusion Capital in the future. All 3,417,500 shares, 10.6% of our outstanding on November 5, 2008, the date of the Purchase Agreement, are being offered pursuant to this prospectus. Under the Purchase Agreement, we have the right but not the obligation to sell more than the 3,000,000 shares to Fusion Capital. As of the date hereof, we do not currently have any plans or intent to sell to Fusion Capital any shares beyond the 3,000,000 shares offered hereby. However, if we elect to sell more than the 3,000,000 shares (which we have the right but not the obligation to do), we must first register such additional shares under the Securities Act before we can elect to sell such additional shares to Fusion Capital. In the event we elect to do so, this could cause substantial dilution to our shareholders. The number of shares ultimately offered for sale by Fusion Capital is dependent upon the number of shares purchased by Fusion Capital under the Purchase Agreement.

We do not have the right to commence any sales of our shares to Fusion Capital until the SEC has declared effective the registration statement of which this prospectus is a part. The registration statement was declared effective on February 5, 2009 and the conditions to commence funding were satisfied. Generally, we have the right but not the obligation from time to time to sell our shares to Fusion Capital in amounts between $50,000 and $1.0 million depending on certain conditions. We have the right to control the timing and amount of any sales of our shares to Fusion Capital. The purchase price of the shares will be determined based upon the market price of our shares without any fixed discount at the time of each sale. Fusion Capital shall not have the right nor the obligation to purchase any shares of our common stock on any business day that the price of our common stock is below $0.45. There are no negative covenants, restrictions on future fundings, penalties or liquidated damages in the Purchase Agreement or the Registration Rights Agreement. The Purchase Agreement may be terminated by us at any time at our discretion without any cost to us. The Purchase Agreement provides that neither party has the ability to amend the Purchase Agreement and the obligations of both parties are non-transferable.

Purchase Of Shares Under The Purchase Agreement

Under the Purchase Agreement, on any business day selected by us, we may direct Fusion Capital to purchase up to $50,000 of our common stock. The purchase price per share is equal to the lesser of:

•

the lowest sale price of our common stock on the purchase date; or

•

the average of the three lowest closing sale prices of our common stock during the twelve consecutive business days prior to the date of a purchase by Fusion Capital.

The purchase price will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the business days used to compute the purchase price. We may direct Fusion Capital to make multiple purchases from time to time in our sole discretion; no sooner than every four business days.

Our Right To Increase the Amount to be Purchased

In addition to purchases of up to $50,000 from time to time, we may also from time to time elect on any single business day selected by us to require Fusion Capital to purchase our shares in an amount up to $100,000 provided that our share price is not below $0.75 during the three business days prior to and on the purchase date. We may increase this amount to up to $250,000 if our share price is not below $1.20 during the three business days prior to and on the purchase date. This amount may also be increased to up to $500,000 if our share price is not below $2.40 during the three business days prior to and on the purchase date. This amount may also be increased to up to $1.0 million if our share price is not below $5.00 during the three business days prior to and on the purchase date. We may direct Fusion Capital to make multiple large purchases from time to time in our sole discretion; however, at least two business days must have passed since the most recent large purchase was completed. The price at which our common stock would be purchased in this type of larger purchases will be the lesser of (i) the lowest sale price of our common stock on the purchase date and (ii) the lowest purchase price (as described above) during the previous seven business days prior to the purchase date.

Minimum Purchase Price

Under the Purchase Agreement, we have set a minimum purchase price (“floor price”) of $0.45. However, Fusion Capital shall not have the right nor the obligation to purchase any shares of our common stock in the event that the purchase price would be less the floor price. Specifically, Fusion Capital shall not have the right or the obligation to purchase shares of our common stock on any business day that the market price of our common stock is below $0.45.

Events of Default

Generally, Fusion Capital may terminate the Purchase Agreement without any liability or payment to the Company upon the occurrence of any of the following events of default:

•

the effectiveness of the registration statement of which this prospectus is a part of lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to Fusion Capital for sale of our common stock offered hereby and such lapse or unavailability continues for a period of 20 consecutive business days or for more than an aggregate of 60 business days in any 365-day period;

•

suspension by our principal market of our common stock from trading for a period of three consecutive business days;

•

the de-listing of our common stock from our principal market provided our common stock is not immediately thereafter trading on the American Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital Market, the Nasdaq Global Select Market or the New York Stock Exchange;

•

the transfer agent‘s failure for five business days to issue to Fusion Capital shares of our common stock which Fusion Capital is entitled to under the Purchase Agreement;

•

any material breach of the representations or warranties or covenants contained in the Purchase Agreement or any related agreements which has or which could have a material adverse effect on us subject to a cure period of five business days;

•

any participation or threatened participation in insolvency or bankruptcy proceedings by or against us; or

•

a material adverse change in our business.

Our Termination Rights

We have the unconditional right at any time for any reason to give notice to Fusion Capital terminating the Purchase Agreement without any cost to us.

No Short-Selling or Hedging by Fusion Capital

Fusion Capital has agreed that neither it nor any of its affiliates shall engage in any direct or indirect short-selling or hedging of our common stock during any time prior to the termination of the Purchase Agreement.

Effect of Performance of the Purchase Agreement on Our Stockholders

All 3,417,500 shares registered in this offering are expected to be freely tradable. It is anticipated that shares registered in this offering will be sold over a period of up to 30 months from the date of this prospectus. The sale by Fusion Capital of a significant amount of shares registered in this offering at any given time could cause the market price of our common stock to decline and to be highly volatile. Fusion Capital may ultimately purchase all, some or none of the 3,000,000 shares of common stock not yet issued but registered in this offering. After it has acquired such shares, it may sell all, some or none of such shares. Therefore, sales to Fusion Capital by us under the Purchase Agreement may result in substantial dilution to the interests of other holders of our common stock. However, we have the right to control the timing and amount of any sales of our shares to Fusion Capital and the Purchase Agreement may be terminated by us at any time at our discretion without any cost to us.

In connection with entering into the Purchase Agreement, we authorized the sale to Fusion Capital of up to 3,000,000 shares of our common stock or 9.3% of our outstanding common stock on November 5, 2008 (the date of the Purchase Agreement). We estimate that we will sell no more than 3,000,000 shares to Fusion Capital under the Purchase Agreement all of which are included in this offering. We have the right to terminate the Purchase Agreement without any payment or liability to Fusion Capital at any time, including in the event that all 3,000,000 shares are sold to Fusion Capital under the Purchase Agreement. Subject to approval by our board of directors, we have the right but not the obligation to sell more than 3,000,000 shares to Fusion Capital. In the event we elect to sell more than the 3,000,000 shares offered hereby, we will be required to file a new registration statement and have it declared effective by the U.S. Securities and Exchange Commission. The number of shares ultimately offered for sale by Fusion Capital under this prospectus is dependent upon the number of shares purchased by Fusion Capital under the Purchase Agreement. The following table sets forth the amount of proceeds we would receive from Fusion Capital from the sale of shares at varying purchase prices:

Assumed Average Purchase Price			Number of Shares to be Sold if Full Purchase		Percentage of Outstanding Shares After Giving Effect to the Issuance to Fusion Capital(1)			Proceeds from the Sale of Shares to Fusion Capital Under the Purchase Agreement
$	0.45			3,000,000		8.0	%	$	1,350,000
$	1.42	(2)		3,000,000		8.0	%	$	4,260,000
$	1.50			3,000,000		8.0	%	$	4,500,000
$	2.00			3,000,000		8.0	%	$	6,000,000
$	2.50			3,000,000		8.0	%	$	7,500,000
$	2.67			3,000,000		8.0	%	$	8,000,000

(1)

The denominator is based on 37,278,667 shares outstanding as of April 27, 2010, which includes the 417,500 shares previously issued to Fusion Capital. The numerator is based on the number of shares issuable under the Purchase Agreement at the corresponding assumed purchase price set forth in the adjacent column.

(2)

Closing sale price of our shares on April 27, 2010.

USE OF PROCEEDS

This prospectus relates to shares of our common stock that may be offered and sold from time to time by the selling stockholders. We will receive no proceeds from the sale of shares of common stock in this offering. However, we may receive up to $8.0 million in proceeds from the sale of our common stock to Fusion Capital under the Purchase Agreement. Any proceeds from Fusion Capital we receive under the Purchase Agreement will be used for working capital and general corporate purposes.

PLAN OF DISTRIBUTION

The common stock offered by this prospectus is being offered by the selling stockholders. The common stock may be sold or distributed from time to time by the selling stockholders directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the common stock offered by this prospectus may be effected in one or more of the following methods:

•

ordinary brokers’ transactions;

•

transactions involving cross or block trades;

•

through brokers, dealers, or underwriters who may act solely as agents

•

“at the market” into an existing market for the common stock;

•

in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents;

•

in privately negotiated transactions; or

•

any combination of the foregoing.

In order to comply with the securities laws of certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the registration or qualification requirement is available and complied with.

Brokers, dealers, underwriters, or agents participating in the distribution of the shares as agents may receive compensation in the form of commissions, discounts, or concessions from the selling stockholders and/or purchasers of the common stock for whom the broker-dealers may act as agent. The compensation paid to a particular broker-dealer may be less than or in excess of customary commissions.

One of the selling stockholders, Fusion Capital, is an “underwriter” within the meaning of the Securities Act.

Neither we nor the selling stockholders can presently estimate the amount of compensation that any agent will receive. We know of no existing arrangements between the selling stockholders, any other stockholder, broker, dealer, underwriter, or agent relating to the sale or distribution of the shares offered by this prospectus. At the time a particular offer of shares is made, a prospectus supplement, if required, will be distributed that will set forth the names of any agents, underwriters, or dealers and any compensation from the selling stockholders, and any other required information.

We will pay all expenses incident to the registration, offering, and sale of the shares to the public other than commissions or discounts of underwriters, broker-dealers, or agents. We have also agreed to indemnify certain selling stockholders, including Fusion Capital, and related persons against specified liabilities, including liabilities under the Securities Act.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Fusion Capital and its affiliates have agreed not to engage in any direct or indirect short selling or hedging of our common stock during the term of the Purchase Agreement.

We have advised the selling stockholders that while they are engaged in a distribution of the shares included in this prospectus they are required to comply with Regulation M promulgated under the Securities Exchange Act of 1934, as amended. With certain exceptions, Regulation M precludes the selling stockholders, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the shares offered by this prospectus.

This offering will terminate on the date that all shares offered by this prospectus have been sold by the selling stockholders.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 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. See “Forward-Looking Statements.” Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly under the heading “Risk Factors.”.

Overview

NeoGenomics operates a network of cancer-focused testing laboratories whose mission is to improve patient care through exceptional cancer genetic diagnostic, prognostic and predictive testing services. Our vision is to become America’s premier cancer testing laboratory by delivering uncompromising quality, exceptional service and innovative products and solutions. The Company’s laboratory network currently offers the following types of testing services:

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;

immunohistochemistry testing, which analyzes the distribution of tumor antigens in specific cell and tissue types, 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, prognosis, and prediction for response to therapy of various types of cancers.

Market Opportunity

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 DNA/RNA sequences 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 reimbursement levels of the three market segments.

The market for cancer testing is growing rapidly. Key factors influencing this growth are: (i) cancer is primarily a disease of the elderly and now that the baby boomer generation has started to turn sixty, the U.S. is experiencing a significant increase in the number of senior citizens, (ii) the American Cancer Society estimates that one in four senior citizens will develop some form of cancer during the rest of their lifetime, and (iii) every year more and more genes are discovered to have a specific link to cancer, which then enables a genetic or molecular test to be developed. We estimate that the Company addresses a $5-6 billion total United States market opportunity, about half of which is derived from genetic and molecular testing with the other half derived from more traditional anatomic pathology testing services that are complementary to and often ordered with the genetic testing services we offer.

Our Focus

NeoGenomics’ primary focus is to provide high complexity laboratory testing for community-based pathology, oncology, dermatology and urology markets in the United States and the Caribbean. 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 due to ease of local access. We currently provide our services to pathologists and oncologists that perform bone marrow and/or peripheral blood sampling for the diagnosis of blood and lymphoid tumors (leukemias and lymphomas) and archival tissue referred for analysis of solid tumors such as breast cancer. We also serve community-based urologists by providing a FISH-based genetic test for the diagnosis of bladder cancer and early detection of recurrent disease.

The high complexity cancer testing services we offer to community-based pathologists are designed to be a natural extension of and complementary to the services that our pathologist clients perform within their own practices. Because fee-for-service pathologists derive a significant portion of their annual revenue from the interpretation of cancer biopsy specimens, they represent an important market segment to us. We believe our relationship as a non-competitive partner to the community-based pathologist empowers these pathologists 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 also believe that we can provide a competitive choice to those larger oncology practices that prefer to have a direct relationship with a laboratory for cancer genetic testing services. Our regionalized approach allows us strong interactions with clients and our innovative Genetic Pathology Solutions (“GPS”) report summarizes all relevant case data on one summary report.

Competitive Strengths

Turnaround Times

At NeoGenomics, we strive to provide industry leading turnaround times to our clients nationwide and to provide information so that physicians can provide their patients with the correct treatment as soon as possible.

We believe our average 4-5 day turn-around time for our cytogenetics testing services and our average 3-4 day turn-around time for FISH testing services continue to be industry-leading benchmarks for national laboratories. The consistent timeliness of results is a competitive strength in cytogenetics and FISH testing and a driver of additional testing requests by our referring physicians. Quick turn-around times for cytogenetics and FISH tests allow for the performance of other tests to augment or confirm results and improve patient care. Without rapid turnaround times, 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 required. We believe our turn-around times result in our referring physicians requesting more of our testing services and give us a significant competitive advantage in marketing our services against those of other competing laboratories.

National Direct Sales Force

NeoGenomics has assembled a strong direct sales force. Our sales representatives (“Territory Business Managers”) are organized into four regions (Northeast, Southeast, Central and West). These sales representatives are trained extensively in cancer genetic testing and consultative selling skills. As of April 27, 2010, we had 23 Territory Business Managers and four Regional Managers.

Strategic Supply Agreement with Abbott Molecular

In July 2009, we entered into a Strategic Supply Agreement with Abbott Molecular, Inc, a wholly-owned subsidiary of Abbott Laboratories. Under the terms of this agreement, NeoGenomics has the rights to develop and exclusively launch three laboratory developed tests (LDTs) based on intellectual property developed and/or licensed by Abbott. We launched the first of these tests in February 2010, a FISH test for the diagnosis of melanoma, and expect to launch the second test in early 2011 and the third in 2012. In conjunction with the Strategic Supply Agreement, Abbott Laboratories purchased a 9.6% stake in NeoGenomics.

New FISH Test for Melanoma

In February 2010 we launched the first of the three tests developed pursuant to the Strategic Supply Agreement with Abbott under the trade name MelanoSITE™. MelanoSITE™ is a four probe FISH test that can be used as a diagnostic aid to traditional histopathologic evaluation in diagnosing melanoma. In conjunction with histopathology, the MelanoSITE™ test can help improve classification of melanocytic neoplasms with conflicting morphologic criteria and help insure proper follow-up. Differential diagnosis of moderate to severely atypical nevi versus true melanoma is one of the most challenging areas in dermatopathology. While most melanomas can be readily distinguished from nevi on histopathologic examination, we estimate there are about 5% of cases that are ambiguous and show conflicting morphologic criteria. Diagnostic ambiguity has significant adverse consequences for patients and the healthcare system at large. Failure to recognize melanoma is potentially fatal, but labeling a benign lesion as malignant can lead to unwarranted wide re-excisions, sentinel lymph node biopsies, adjuvant toxic therapeutic interventions and the emotional strain of facing a diagnosis of cancer. Considering the large number of biopsies done in the U.S. to either confirm or rule out melanoma, diagnostic uncertainty of this scale represents a significant challenge to the U.S. healthcare system. We believe the MelanoSITE™ test will help address this diagnostic uncertainty and help to reduce the medical costs associated with melanoma by providing a more accurate diagnosis.

The performance characteristics of the MelanoSITE™ test were established in a multicenter validation study involving over 500 cases, which resulted in a sensitivity (a measure of true positives and false negatives) of 77% and a specificity (a measure of true negatives and false positives) of 97%. Importantly, based on our study, the MelanoSITE™ test has a negative predictive value (NPV) of over 98%. This means that dermatopathologists and dermatologists can be confident that a patient with a negative test result has a very low likelihood of having melanoma. Therefore, the clinician may not need to perform a wide re-excision of the lesion, potentially scarring a patient for life, and may not need to perform a sentinel lymph node biopsy which can potentially lead to further complications such as lymphedema. We expect the marketing and selling of the MelanoSITE™ test to be a major focus of the Company during 2010.

Client Care

NeoGenomics Customer Care Specialists (“CCS”) are organized by region into territories that service not only our external clients, but also work very closely with and support our sales team. A client receives personalized assistance when dealing with their dedicated CCS because each CCS understands their clients’ specific needs. CCS’s handle everything from arranging specimen pickup to delivering the results to fulfill NeoGenomics’ objective of delivering exceptional services to our clients.

Geographic Locations

In 2009, we continued an aggressive campaign to regionalize our laboratory operations around the country to be closer to our clients. Many 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. We believe that our clients and prospects desire to do business with a laboratory with national breadth and a local presence. NeoGenomics’ has four facilities. The Chatsworth California location is a small office laboratory for our pathologists. and we have three main laboratory locations in Fort Myers, Florida; Irvine California; and Nashville Tennessee and all facilities have the appropriate state licenses and Clinical Laboratory Improvement Act, as amended (“CLIA”), and College of American Pathologists (“CAP”) accreditations and are currently receiving specimens. As situations dictate and opportunities arise, we will continue to develop and open new laboratories, linked together by our optimized Laboratory Information System (“LIS”), to better meet the regionalized needs of our clients.

Laboratory Information System

NeoGenomics has what we believe is a state of the art LIS that interconnects our locations and provides flexible reporting options to clients. This system allows us to deliver uniform test results throughout our network, regardless of where the lab that performs any specific test is located. This allows us to move specimens between locations to better balance our workload. Our LIS also allows us to offer highly specialized services to certain sub-segments of our client base. For instance, our tech-only NeoFISHTM and NeoFLOWTM applications allow our community-based pathologist clients to tailor individual reports to their own customizable report templates. This feature has been well-received by our tech-only clients.

Scientific Pipeline

The field of cancer genetics is rapidly evolving, and we are committed to developing and offering new tests to meet the needs of the market place based on the latest scientific discoveries. During 2009, in addition to the validation work performed for our exclusive Melanoma FISH test, the Company made significant strides in developing the capability to perform molecular diagnostic testing in-house. We believe that by adding additional types of tests to our product offering, we will be able to increase our testing volumes through our existing client base as well as more easily attract new clients via the ability to package our testing services more appropriately to the needs of the market. We expect to launch at least five new molecular tests in 2010.

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 for the years ended December 31, 2009 and 2008 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

Stock Based Compensation

Revenue Recognition

The Company recognizes revenues in accordance with SEC Staff Accounting Bulletin Topic 13.A.1 (ASC 605-10-S99-1), “Revenue Recognition”, when (a) the price is fixed or determinable, (b) persuasive evidence of an arrangement exists, (c) the service is performed and (d) 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. As a result of the economic climate in the United States, we have used shorter and more current time horizons in analyzing historical experience.

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 payer. 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 2009, we recorded approximately $279,000 of net total incremental revenue from tests in which we underestimated the revenue in 2008 relative to the amounts that we ultimately received in 2009. This was approximately 0.9% of our total 2009 fiscal year revenue and 1.4% of our 2008 fiscal year revenue. During 2008, we recorded approximately $259,000 of net total incremental revenue from tests in which we underestimated the revenue in 2007 relative to the amounts that we ultimately received in 2008. This was approximately 1.3% of our total 2008 fiscal year revenue and 2.3% of our 2007 fiscal year 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 payers with whom we deal. We regularly refine our estimates in order to make our estimated revenue as accurate as possible based on our most recent collection experience with each third party payer.

The following tables present the dollars and percentage of the Company’s net accounts receivable from customers outstanding by aging category at December 31, 2009 and 2008. All of our receivables were pending approval by third-party payers as of the date that the receivables were recorded:

NEOGENOMICS AGING OF RECEIVABLES BY PAYOR GROUP

December 31, 2009

Payor Group	0-30		%			30-60		%			60-90		%			90-120		%			120-150		%			>150		%			Total		%
Client	$	210,672		4	%	$	425,731		8	%	$	437,552		8	%	$	216,692		4	%	$	52,257		1	%	$	75,884		1	%	$	1,418,788		27	%
Commercial Insurance		581,824		11	%		428,340		8	%		255,488		5	%		152,239		3	%		96,916		2	%		370,977		7	%		1,885,784		36	%
Medicaid		18,227		0	%		13,312		0	%		13,552		1	%		11,423		0	%		5,544		0	%		26,049		0	%		88,107		2	%
Medicare		895,518		17	%		107,357		2	%		103,804		2	%		41,780		1	%		36,293		1	%		256,861		5	%		1,441,613		28	%
Private Pay		78,842		2	%		71,059		1	%		39,912		1	%		12,866		0	%		20,809		0	%		36,866		1	%		260,374		5	%
Unbilled Revenue		126,564		2	%		-		0	%		-		0	%		-		0	%		-		0	%				0	%		126,564		2	%
Total	$	1,911,647		36	%	$	1,045,799		19	%	$	850,308		17	%	$	435,000		8	%	$	211,819		4	%	$	766,637		14	%	$	5,221,230		100	%

December 31, 2008

Payor Group	0-30		%			30-60		%			60-90		%			90-120		%			120-150		%			>150		%			Total		%
Client	$	280,002		9	%	$	189,811		6	%	$	285,126		9	%	$	176,406		5	%	$	144,897		4	%	$	26,762		1	%	$	1,103,004		34	%
Commercial Insurance		350,009		11	%		217,741		7	%		137,210		4	%		104,836		3	%		70,959		2	%		287,272		9	%		1,168,027		36	%
Medicaid		434		0	%		7,312		0	%		14,861		1	%		12,124		0	%		8,078		0	%		42,145		1	%		84,954		2	%
Medicare		530,833		16	%		56,334		2	%		33,149		1	%		12,054		0	%		23,378		1	%		53,993		2	%		709,741		22	%
Private Pay		25,341		1	%		35,004		1	%		29,354		1	%		15,969		0	%		13,114		0	%		27,142		1	%		145,924		4	%
Unbilled Revenue		60,523		2	%		-		-			-		-			-		-			-		-					-			60,523		2	%
Total	$	1,247,142		39	%	$	506,202		16	%	$	499,700		16	%	$	321,389		8	%	$	260,426		7	%	$	437,314		14	%	$	3,272,173		100	%

During 2009, we decreased our accounts receivable greater than 120 days as a percentage of total accounts receivable by 3%. This decrease could have been larger but an increase in Medicare receivables greater than 150 days resulted because of delays in receiving our Medicare provider number for our Chatsworth facility from California Medicare. The licensing and inspections of this facility were completed and valid but significant delays in the processing of our application by California Medicare caused the application to become stale resulting in us having to resubmit the application several times. In January 2010 we received our provider number and we expect to be able to resubmit all previous claims and receive payment on them during the year ending December 31, 2010.

Based on a detailed analysis, we believe that our $589,000 allowance for doubtful accounts, which represents approximately 11% of our receivables balance, is adequate as of December 31, 2009. At December 31, 2008, our allowance for doubtful accounts was $359,000 or 11% of accounts receivable.

Stock Based Compensation.

The Company accounts for stock-based compensation in accordance with FASB ASC Topic 718 Compensation – Stock Compensation. ASC Topic 718 requires recognizing compensation costs for all share-based payment awards made to employees and directors based upon the awards’ grant-date fair value.

For stock options, the Company uses a trinomial lattice option-pricing model to estimate the grant-date fair value of stock option awards, and recognizes compensation cost on a straight-line basis over the awards’ requisite service periods. The Company estimates an expected forfeiture rate, which is factored into the determination of the Company’s quarterly expense.

See Note B – Summary of Significant Accounting Policies - Stock-Based Compensation and Note F – Stock Based Compensation in the Notes to Consolidated Financial Statements for more information regarding the valuation of stock-based compensation.

Results of Operations for the Three Months Ended March 31, 2010 as Compared to the Three Months Ended March 31, 2009

The following table presents the condensed consolidated statements of operations as a percentage of revenue:

	For the three months ended March 31.
	2010			2009
NET REVENUE		100	%		100	%
COST OF REVENUE		52	%		45	%
GROSS PROFIT		48	%		55	%
OPERATING EXPENSES:
General and administrative		34	%		34	%
Sales and marketing		21	%		19	%
TOTAL OPERATING EXPENSES		55	%		53	%

Interest (income) expense, net		2	%		2	%
NET INCOME (LOSS)		(9	)%		0	%

Revenue

The Company’s specialized testing services are performed based on a written test requisition form and revenues are recognized once the testing 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. Our testing services are billed to various payors, including Medicare, commercial insurance companies, other directly billed healthcare institutions such as hospitals and clinics, and individuals. We report 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. We report 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, we review our historical collection experience for non-contracted payors and adjust our expected revenues for current and subsequent periods accordingly.

Revenues increased approximately 22%, or $1.5 million, to $8.4 million for the three months ended March 31, 2010 as compared to $6.9 million for the three months ended March 31, 2009. The revenue increase for the three months ended March 31, 2010, as compared to the comparable period in 2009, was primarily driven by increases in the number of tests performed partially offset by a decline in average revenue per test.

Test volume increased approximately 34% for the three months ended March 31, 2010. Increases in test volumes were primarily driven by the substantial increases in sales and marketing activities by the Company over the past twelve months.

Revenues per test are a function of both the type of the test (e.g. FISH, cytogenetics, flow cytometry, etc.) and the payer (e.g., Medicare, Medicaid, third party insurer, institutional client etc.). Average revenue per test is primarily driven by our test type mix and our payer mix. The decrease in average revenue per test for the three months ended March 31, 2010 is primarily the result of decreases in our managed care reimbursements and to a lesser extent from lower priced tests in our test type mix.

We have established a reserve for uncollectible amounts based on estimates of what we will collect from: a) third-party payers with whom we do not have a contractual arrangement or sufficient experience to accurately estimate the amount of reimbursement we will receive, b) payments directly from patients, and c) those procedures that are not covered by insurance or other third party payers. The Company’s allowance for doubtful accounts increased 18%, or approximately $106,000 to $695,000, as compared to $589,000 at December 31, 2009. The allowance for doubtful accounts was approximately 11% of accounts receivable on March 31, 2010 and December 31, 2009.

Cost of Revenue

Cost of revenue includes payroll and payroll related costs for performing tests, depreciation of laboratory equipment, rent for laboratory facilities, laboratory reagents, probes and supplies, and delivery and courier costs relating to the transportation of specimens to be tested.

Cost of revenue increased approximately 41%, or $1.2 million, to $4.3 million for the three months ended March 31, 2010 as compared to $3.1 million for the three months ended March 31, 2009. The increase was primarily attributable to increases in all areas of costs of revenue as the Company scaled its operations in order to meet increasing demand. Cost of revenue as a percentage of revenue was approximately 52% for the three months ended March 31, 2010 as compared to 45% for the three months ended March 31, 2009.

Accordingly, gross margin was approximately 48% for the three months ended March 31, 2010 as compared to 55% for the three months ended March 31, 2009. This decline in gross margin is primarily the result of our largest customer at March 31, 2009 bringing in-house certain high margin tests in the second quarter of 2009 and replacing a portion of that volume with additional low margin testing. This customer represented 6% of total revenue for the three months ended March 31, 2010 compared to 18% for the comparable period in 2009.

Sales and Marketing

Sales and marketing expenses relate primarily to the employee related costs of our sales management, sales representatives, marketing, and customer service personnel.

	For the three months ended March 31,
	2010			2009			% Change
Sales and marketing	$	1,763,000		$	1,334,000			32	%
As a % of revenue		21	%		19	%

The increase in sales and marketing expenses is primarily a result of adding substantial numbers of sales and marketing personnel in 2009 to generate additional revenue growth as well as marketing costs related to our Melanoma FISH test.

We expect our sales and marketing expenses to increase as we hire additional sales management, sales representatives, and marketing personnel as part of our growth strategy. However, we expect these expenses to decline as a percentage of revenue as our case volumes increase and we develop more economies of scale in our sales and marketing activities.

General and Administrative Expenses

General and administrative expenses relate to billing, bad debts, finance, human resources, information technology, and other administrative functions. They primarily consist of employee related costs (such as salaries, fringe benefits, and stock-based compensation expense), professional services, facilities expense, and depreciation and administrative-related costs allocated to general and administrative expenses. In addition, the provision for doubtful accounts is included in general and administrative expenses.

	For the three months ended March 31,
	2010			2009			% Change
General and administrative	$	2,902,000		$	2,341,000			24	%
As a % of revenue		34	%		34	%

The increase in general and administrative expenses is primarily a result of adding additional management and information technology personnel and due to approximately $200,000 of additional R&D expenses incurred to develop the Melanoma FISH test.

Bad debt expense increased by approximately 7%, or $33,000, to $540,000 for the three months ended March 31, 2010 as compared to $508,000 for the three months ended March 31, 2009. Bad debt expense as a percentage of revenue for the three months ended March 31, 2010 was 6.5% as compared to 7.3% for the three months ended March 31, 2009.

The decrease in bad debt expense as a percentage of revenue is the result of improvements in our billing practices.

We expect our general and administrative expenses to increase as we add personnel; increase our billing and collections activities; incur additional expenses associated with the expansion of our facilities and backup systems; and continue to build our physical infrastructure to support our anticipated growth. However, we expect general and administrative expenses to decline as a percentage of our revenue as our case volumes increase and we develop more operating leverage in our business.

Interest Expense, net

Interest expense net, which represents the interest expense we incur on our borrowing arrangements offset by the interest income we earn on cash deposits. Interest expense, net increased approximately 39%, or $44,000 to $159,000 for the three months ended March 31, 2010 as compared to $115,000 for the three months ended March 31, 2009. Interest expense is primarily related to the amount of our capital leases outstanding and to a lesser extent to the borrowing under our credit facility with CapitalSource Finance, LLC (“CapitalSource”). Interest expense increased over the same period in the prior year primarily as a result of the higher capital lease and working capital facility balances as of March 31, 2010 as compared to March 31, 2009.

Net Income (Loss)

As a result of the foregoing, we reported a net loss of $750,000, or $(0.02)/share, for the three months ended March 31, 2010 as compared to a net income of $33,000, or $0.00/share, for the three months ended March 31, 2009.

Results of Operations for the year ended December 31, 2009 as compared with the year ended December 31, 2008

The following table presents the condensed consolidated statements of operations as a percentage of revenue:

	For the year ended December 31.
	2009			2008
NET REVENUE		100	%		100	%
COST OF REVENUE		48	%		47	%
GROSS PROFIT		52	%		53	%
OPERATING EXPENSES:
General and administrative		34	%		41	%
Sales and marketing		24	%		17	%
TOTAL OPERATING EXPENSES		58	%		58	%

Interest (income) expense, net		2	%		2	%
NET INCOME (LOSS)		(8	)%		(7	)%

Revenue

During the year ended December 31, 2009, our revenues increased approximately 47% to $29,469,000 from $20,015,000 during the year ended December 31, 2008. ..

Test volume increased approximately 40% for the year ended December 31, 2009. Increases in test volumes were primarily driven by the substantial increases in sales and marketing activities by the Company over the past year.

For the year ended December 31, 2009, our average revenue per client requisition increased by approximately 15% to $931 from $808 in 2008. Our average revenue per test increased by approximately 5% to $645 in 2009 from $615 in 2008. Revenues per test are a function of both the type of the test and the payer.

Cost of Revenue

Our cost of revenue, as a percentage of gross revenue, increased from 47% for the year ended December 31, 2008 to 48% for the year ended December 31, 2009. This increase was primarily the result of the restructuring of our relationship with our largest customer and the resulting change in mix from a higher margin test to a lower margin test.

Gross Profit

As a result of the 47% increase in revenue and our 48% cost of revenue, our gross profit increased 43% to $15,215,000 for the year ended December 31, 2009, from a gross profit of $10,661,000 for the year ended December 31, 2008. When expressed as a percentage of revenue, our gross margins decreased from 53.3% for the year ended December 31, 2008 to 51.6% for the year ended December 31, 2009.

Sales and Marketing

Sales and marketing expenses relate primarily to the employee related costs of our sales management, sales representatives, marketing, and customer service personnel.

	For the year ended December 31.
	2009			2008			% Change
Sales and marketing	$	6,885,000		$	3,367,000			105	%
As a % of revenue		23	%		17	%

Sales and marketing expenses increased approximately 105%, or $3,519,000 to $6,885,000 for the year ended December 31, 2009 as compared to $3,367,000 for the year ended December 31, 2008, primarily as a result of adding substantial numbers of sales and marketing personnel in 2009 to generate additional revenue growth. At December 31, 2009, we had 43 sales and marketing and customer care personnel compared with 33 sales and marketing and customer care personnel at December 31, 2008.

General and Administrative Expenses

General and administrative expenses relate to billing, finance, human resources, information technology, and other administrative functions. They primarily consist of employee related costs (such as salaries, fringe benefits, and stock-based compensation expense), professional services, facilities expense, and depreciation and administrative-related costs allocated to general and administrative expenses. In addition, the provision for doubtful accounts is included in general and administrative expenses.

	For the year ended December 31.
	2009			2008			% Change
General and administrative	$	10,057,000		$	8,179,000			23	%
As a % of revenue		34	%		41	%

General and administrative expenses increased approximately 23%, or $1,878,000 to $10,057,000 for the year ended December 31, 2009 as compared to $8,179,000 for the year ended December 31, 2008. The increase in general and administrative expenses is primarily a result of adding additional management, information technology, and billing personnel to support the increase in our revenue.

Bad debt expense increased by approximately 20%, or $365,000 to $2,155,000 for the year ended December 31, 2009 as compared to $1,790,000 for the year ended December 31, 2008. This increase was primarily a result of the significant increases in revenue partially offset by a decrease in bad debt as percentage of revenue. Bad debt as a percentage of revenue decreased 1.6% to 7.3% for the year ended December 31, 2009 from 8.9% of revenue for the year ended December 31, 2008. This decline was the result of managed care contracts we entered into during the year and improved performance by our billing department.

We expect our general and administrative expenses to increase as we add personnel, increase our billing and collections activities; incur additional expenses associated with the expansion of our facilities and backup systems; and continue to build our physical infrastructure to support our anticipated growth. However, we expect general and administrative expenses to continue to decline as a percentage of our revenue as our case volumes increase and as we continue to develop more operating leverage in our business.

Other (Income) Expense

Other income and expense primarily represents the interest expense we incur on our borrowing arrangements (primarily comprised of interest payable on advances under our revolving credit facility with Capital Source and interest paid on capital lease obligations) offset by the interest income we earn on cash deposits. Interest expense increased from $309,000 in 2008 to $532,000 in 2009, reflecting higher borrowings, particularly related to our capital lease obligations as we acquired additional equipment to support our increasing volume of business. This increase was largely offset in 2009 because in 2008 we incurred a one-time $200,000 write down of our investment associated with a potential joint venture, as discussed in Note M to our consolidated financial statements.

Net Loss

As a result of the foregoing, our net loss increased approximately 62% from approximately ($1,383,000) or $(0.04) per share for the year ended December 31, 2008 to approximately ($2,243,000) or $(0.06) per share for the year ended December 31, 2009.

Commitments

Employment Contracts with named Executive Officers

The Company is a party to employment contracts with several of its officer’s that contain commitments as described in Note G to our consolidated financial statements and detailed below is a list of all such contracts signed during 2009.

On March 16, 2009, the Company entered into an employment agreement with Douglas M. VanOort (the “Employment Agreement”) to employ Mr. VanOort in the capacity of Executive Chairman and interim Chief Executive Officer. The Employment Agreement has an initial term from March 16, 2009 through March 16, 2013, which initial term automatically renews for one year periods. Mr. VanOort will receive a salary of $225,000 per year for so long as he spends not less than 2.5 days per week on the affairs of the Company. He will receive an additional $50,000 per year while serving as the Company’s interim Chief Executive Officer; provided that he spends not less than 3.5 days per week on average on the affairs of the Company. Mr. VanOort is also eligible to receive an annual cash bonus based on the achievement of certain performance metrics of at least 30% of his base salary (which includes amounts payable with respect to serving as Executive Chairman and interim Chief Executive Officer). Mr. VanOort is also entitled to participate in all of the Company’s employee benefit plans and any other benefit programs established for officers of the Company.

The Employment Agreement also provides that Mr. VanOort will be granted an option to purchase 1,000,000 shares of the Company’s common stock under the Company’s Amended and Restated Equity Incentive Plan (the “Amended Plan”). The exercise price of such option is $0.80 per share. 500,000 shares of common stock subject to the option will vest according to the following schedule (i) 200,000 shares will vest on March 16, 2010 (provided that if Mr. VanOort’s employment is terminated by the Company without “cause” then the pro rata portion of such 200,000 shares up until the date of termination shall vest); (ii) 12,500 shares will vest each month beginning on April 16, 2010 until March 16, 2011; (iii) 8,000 shares will vest each month beginning on April 16, 2011 until March 16, 2012 and (iv) 4,500 shares will vest each month beginning on April 16, 2012 until March 16, 2013. 500,000 shares of common stock subject to the option will vest based on the achievement of certain performance metrics by the Company. Any unvested portion of the option described above shall vest in the event of a change of control of the Company.

Either party may terminate Mr. VanOort’s employment with the Company at any time upon giving sixty days advance written notice to the other party. The Company and Mr. VanOort also entered into a Confidentiality, Non-Solicitation and Non-Compete Agreement in connection with the Employment Agreement.

On March 16, 2009, the Company and the Douglas M. VanOort Living Trust entered into a Subscription Agreement (the “Subscription Agreement”) pursuant to which the Douglas M. VanOort Living Trust purchased 625,000 shares of the Company’s common stock at a purchase price of $0.80 per share (the “Subscription Shares”). The Subscription Shares are subject to a two year lock-up that restricts the transfer of the Subscription Shares; provided, however, that such lock-up shall expire in the event that the Company terminates Mr. VanOort’s employment. The Subscription Agreement also provides for certain piggyback registration rights with respect to the Subscription Shares.

On March 16, 2009, the Company and Mr. VanOort entered into a Warrant Agreement (the “Warrant Agreement”) pursuant to which Mr. VanOort, subject to the vesting schedule described below, may purchase up to 625,000 shares of the Company’s common stock at an exercise price of $1.05 per share (the “Warrant Shares”). The Warrant Shares vest based on the following vesting schedule:

(i)

20% of the Warrant Shares vest immediately,

(ii)

20% of the Warrant Shares will be deemed to be vested on the first day on which the closing price per share of the Company’s common stock has reached or exceeded $3.00 per share for 20 consecutive trading days,

(iii)

20% of the Warrant Shares will be deemed to be vested on the first day on which the closing price per share of the Company’s common stock has reached or exceeded $4.00 per share for 20 consecutive trading days,

(iv)

20% of the Warrant Shares will be deemed to be vested on the first day on which the closing price per share of the Company’s common stock has reached or exceeded $5.00 per share for 20 consecutive trading days and

(v)

20% of the Warrant Shares will be deemed to be vested on the first day on which the closing price per share of the Company’s common stock has reached or exceeded $6.00 per share for 20 consecutive trading days.

In the event of a change of control of the Company in which the consideration payable to each common stockholder of the Company in connection with such change of control has a deemed value of at least $4.00 per share then the Warrant Shares shall immediately vest in full. In the event that Mr. VanOort resigns his employment with the Company or the Company terminates Mr. VanOort’s employment for “cause” at any time prior to the time when all Warrant Shares have vested, then the rights under the Warrant Agreement with respect to the unvested portion of the Warrant Shares as of the date of termination will immediately terminate.

On October 28, 2009, the Company appointed Mr. VanOort, to the position of Chief Executive Officer and amended and restated his employment agreement, as previously disclosed, pursuant to a Current Report on Form 8-K filed with the Securities and Exchange Commission on November 3, 2009. Mr. VanOort previously held the position of Executive Chairman and Interim Chief Executive Officer of the Company from March 16, 2009 until October 28, 2009. Mr. VanOort also serves as the Chairman of the Company’s Board of Directors.

On July 22, 2009, the Company entered into an employment agreement with Grant Carlson (to employ Mr. Carlson in the capacity of Vice President Sales.. The Offer Letter provides for a four (4) year term, which is terminable upon written notice by either party. The Offer Letter also provides for an initial base salary of $200,000 per year and provides that Mr. Carlson is eligible to receive an incentive bonus targeted at 30% of his base salary based on the achievement of certain goals. Mr. Carlson is entitled to participate in all medical and other benefits that the Company has established for its employees. Mr. Carlson also is entitled to an automobile allowance of $700 per month (plus reimbursement for work-related gas expenses) and reimbursement for personal telephone and cell phone use at a rate of $250 per month. Mr. Carlson is also eligible for four (4) weeks of paid time off per year. Mr. Carlson is also eligible for up to $20,000 of relocation assistance. Mr. Carlson was granted 150,000 stock options at an exercise price of $1.34 and with a five year term so long as Mr. Carlson remains an employee of the Company. These options are scheduled to vest according to the passage of time. So long as Mr. Carlson remains employed by the Company, such option will have a five-year term and will be subject to time and performance based vesting. If Mr. Carlson resigns prior to July 6, 2010, he will forfeit the option. If the Company terminates Mr. Carlson without cause then the Company will continue to pay Mr. Carlson’s base salary and maintain his employee benefits for a period of six (6) months.

On November 30, 2009, we entered into an employment agreement with George Cardoza, our Chief Financial Officer. The Employment Agreement has an initial term from November 30, 2009 through November 29, 2013, which initial term automatically renews for one year periods. The employment agreement specifies an initial base salary of $190,000/year. Mr. Cardoza is also entitled beginning with the year ended December 31, 2010 to receive cash bonuses for any given fiscal year in an amount equal to 30% of his base salary if he meets certain goals established by the CEO and approved by the board of directors. In addition, Mr. Cardoza was granted 150,000 stock options at an exercise price of $1.55 and with a five year term so long as Mr. Cardoza remains an employee of the Company. These options are scheduled to vest according to the passage of time. Mr. Cardoza's employment agreement also specifies that he is entitled to four weeks of paid vacation per year and other insurance benefits. Mr. Cardoza is also eligible for up to $20,000 of relocation assistance. In the event that Mr. Cardoza is terminated without cause by the Company, the Company has agreed to pay Mr. Cardoza's base salary and maintain his benefits for a period of six months.

On December 7, 2009, we entered into an employment agreement with Jack G. Spitz, our Vice President of Laboratory Operations. The Employment Agreement has an initial term from December 7, 2009 through December 6, 2013, which initial term automatically renews for one year periods. The employment agreement specifies an initial base salary of $210,000/year. Mr. Spitz is also entitled beginning with the year ended December 31, 2010 to receive cash bonuses for any given fiscal year in an amount equal to 30% of his base salary if he meets certain goals established by the President or CEO and approved by the board of directors. In addition, Mr. Spitz was granted 150,000 stock options at an exercise price of $1.52 and with a five year term so long as Mr. Spitz remains an employee of the Company. These options are scheduled to vest according to the passage of time. Mr. Spitz's employment agreement also specifies that he is entitled to four weeks of paid vacation per year and other insurance benefits. Mr. Spitz is also eligible for up to $35,000 of relocation assistance. In the event that Mr. Spitz is terminated without cause by the Company, the Company has agreed to pay Mr. Spitz's base salary and maintain his benefits for a period of six months.

Purchase Commitments

The Company had open purchase commitments with two vendors of laboratory equipment for approximately $500,000 of equipment at December 31, 2009. This equipment was delivered in January 2010.

Operating Commitments

The Company leases its laboratory and office facilities under non-cancelable operating leases. Please refer to Note G of the consolidated financial statements for a schedule of commitments for operating leases.

Capital Lease Obligations

The Company leases certain property and equipment under various agreements accounted for as capital lease obligations. Please refer to Note K of the consolidated financial statements for a schedule of capital lease commitments. Two lease lines were established during the fourth quarter of 2010 as below.

Wells Fargo Lease Agreement

On October 2, 2009, we and Wells Fargo Equipment Finance, Inc. (“Wells Fargo”), entered into a Master Lease Agreement (the “Wells Fargo Lease”). The Wells Fargo Lease establishes the general terms and conditions pursuant to which NeoGenomics Laboratories, Inc. may lease $750,000 in equipment. Advances under the lease line may be made for 180 days by executing supplemental schedules for each advance, which would have a 60 month term.

On October 2, 2009, we entered into Lease Supplement No. 1 of the Wells Fargo Lease for $265,200 which was funded to one vendor for lab equipment. Supplement No. 1 has a term of 60 months with monthly payments of $5,396 and a $1.00 final purchase payment at termination. Supplement No. 1 is being accounted for as a capital lease.

At December 31, 2009 there was $484,800 remaining on this capital lease line.

SunTrust Lease Agreement

On October 28, 2009, we and SunTrust Equipment Finance & Leasing Corp. (“SunTrust”), entered into an equipment lease agreement (the “SunTrust Lease”). The SunTrust Lease establishes the general terms and conditions pursuant to which the Subsidiary may lease up to $1.5 million in equipment and other property.

On November 12, 2009, we entered into Lease Schedule No. 1 of the SunTrust lease for $428,465 which was funded to several vendors for lab equipment, computer hardware and furniture and fixtures. Schedule 1 has a term of 60 months with monthly payments of $8,433 and a $1.00 final purchase payment at termination. Schedule No. 1 is being accounted for as a capital lease. As part of this schedule, we agreed to keep at least $1,000,000 in compensating cash balances with SunTrust as long as we owed any monies under the schedule. This balance is accounted for as current restricted cash as we have the ability to pay-off the schedule at any time and as a result of that we have shown the principal owed on the arrangement as a current liability.

At December 31, 2009 there was $1,071,535 available to borrow on this facility.

Liquidity and Capital Resources

The following table presents a summary of our cash flows provided by (used in) operating, investing and finance activities for the three months ended March 31, 2010 and 2009 as well as the period ending cash and cash equivalents and working capital.

	For the three months ended March 31.
	2010			2009
Net cash provided by (used in):
Operating activities	$	(1,564,000	)	$	(331,000	)
Investing activities		(114,000	)		(6,000	)
Financing activities		1,708,000			726,000
Net increase in cash and cash equivalents		30,000			389,000
Cash and cash equivalents, beginning of period		1,631,000			468,000
Cash and cash equivalents, end of period (1)	$	1,661,000		$	857,000
Working Capital (2), end of period	$	1,766,000		$	2,744,000

(1) This excludes restricted cash of $1.0M

(2) Defined as current assets - current liabilities.

The large increase in cash used in operations for the three months ended March 31, 2010 as compared to the comparable period in 2009 is primarily the result of loss from operations, increases in our Accounts Receivable from increased revenues, as well as the result of legislation that expired on December 31, 2009 which grandfathered the implementation of new reimbursement procedures for the technical component of Medicare tests performed for certain hospital clients (known as the “TC Grandfather” legislation). The extension of this legislation was part of the Patient Protection and Affordable Care Act, HR 3590 which was delayed and not signed by the President until late March 2010. As a result of this the Centers for Medicare and Medicaid Services (“CMS”), had asked reference laboratories to hold off on submission of the grandfather related claims and therefore we did not submit claims for approximately $750,000 until the last week of March 2010. We expect to be paid on these claims in the second quarter of 2010 and have seen significant cash collections in April related to these claims.

The increase in cash used in investing activities relates to paying more cash for capital expenditures than in the prior year.

The increase in net cash flow provided by financing activities was primarily the result of increases in funding on our Capital Source working capital facility related to the increase in Accounts Receivable as well as our operating losses. This funding was partially offset by payments on our capital lease facilities.

The following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the year ended December 31, 2009 and 2008 as well as the period ending cash and cash equivalents and working capital.

	For the year ended December 31.
	2009			2008
Net cash provided by (used in):
Operating activities	$	(1,500,417	)	$	(138,306	)
Investing activities		(963,740	)		(501,781	)
Financing activities		3,627,055			897,685
Net increase in cash and cash equivalents		1,162,898			257,598
Cash and cash equivalents, beginning of period		468,171			210,573
Cash and cash equivalents, end of period	$	1,631,069		$	468,171
Working Capital (1), end of period	$	2,743,903		$	(35,425	)

(1)

Defined as current assets less current liabilities.

During the year ended December 31, 2009, our operating activities used approximately $1,500,000 of cash compared with $138,000 of cash used in the comparable period in 2008. This increase was primarily as a result of the increase in accounts receivable in 2009 as compared with 2008. Cash used in investing activities was approximately $964,000 in 2009 compared with $502,000 in 2008, reflecting increased purchases of equipment to support our increased volume of business. In 2009, our net cash flow provided by financing activities was approximately $3,627,000 which was primarily derived from sales of our common stock and the exercise of common stock warrants. At December 31, 2009 and 2008, we had unrestricted cash and cash equivalents of approximately $1,630,000 and $468,000 respectively. We also had $1,000,000 of restricted cash at December 31, 2009.

On November 5, 2008, we entered into a common stock purchase agreement (the “Stock Agreement”) with Fusion Capital Fund II, LLC an Illinois limited liability company (“Fusion”). The Stock Agreement, which has a term of 30 months, provides for the future funding of up to $8.0 million from sales of our common stock to Fusion on a when and if needed basis as determined by us in our sole discretion, depending on, among other things, the market price of our common stock. As of March 31, 2010, we had not drawn on any amounts under the Fusion Stock Agreement.

On February 1, 2008, we entered into a revolving credit facility with CapitalSource, which allows us to borrow up to $3,000,000 based on a formula which is tied to our eligible accounts receivable that are aged less than 150 days.

As of March 31, 2010, we had approximately $1,661,000 in cash on hand, $547,000 of availability under our credit facility, and up to $8.0 million under the Fusion Stock Agreement. As such, we believe we have adequate resources to meet our operating commitments for the next twelve months, and accordingly our consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

On April 26, 2010 as described more fully in subsequent events we increased our Credit Facility to $5.0 million and we had an outstanding amount due on the Credit Facility of approximately $2.3 million and the available credit under the Credit Facility was approximately $1.7 million.

Capital Expenditures

We currently forecast capital expenditures in order to execute on our business plan. The amount and timing of such capital expenditures will be determined by the volume of business, but we currently anticipate that we will need to purchase approximately $3.0 million to $4.0 million of additional capital equipment during the next year. We plan to fund these expenditures with cash, through bank loan facilities, and through capital lease financing arrangements. If we are unable to obtain such funding, we will need to pay cash for these items or we will be required to curtail our equipment purchases, which may have an impact on our ability to continue to grow our revenues. Please see Note K to the consolidated financial statements for further detail with respect to lease financing facilities.

Subsequent Events

SunTrust Lease Agreement

On April 13, 2010, the Company entered into Lease Schedule No. 3 of the SunTrust lease for approximately $249,000 which was funded to several vendors for lab equipment and computer hardware. Schedule 3 has a term of 60 months with monthly payments of approximately $4,900 and a $1.00 final purchase payment at termination. Schedule No. 3 is being accounted for as a capital lease.

After entering into Lease Schedule No. 3 on January 19, 2010, we have approximately $533,000 available for further advances under the SunTrust Lease.

Amended and Restated Revolving Credit and Security Agreement with Capital Source Bank

On April 26, 2010, the Parent Company, NeoGenomics Laboratories, Inc., the wholly-owned subsidiary of the Parent Company (“Borrower”), and CapitalSource entered into an Amended and Restated Revolving Credit and Security Agreement (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement amended and restated the Revolving Credit and Security Agreement dated February 1, 2008, as amended, among the Parent Company, Borrower and CapitalSource (the “Original Credit Agreement”). The terms of the Amended and Restated Credit Agreement and the Original Credit Agreement are substantially similar except that the Amended and Restated Credit Agreement, among other things, (i) increases the maximum principal amount of the revolving credit facility from $3,000,000 to $5,000,000, (ii) provides that the term of the Amended and Restated Credit Agreement shall end on February 1, 2013, (iii) increases the amount of the collateral management fee and unused line fees paid by Borrower to CapitalSource, (iv) modifies the definitions of “Minimum Termination Fee” and “Permitted Indebtedness”, (v) provides that the Borrower must maintain a minimum outstanding principal balance under the revolving facility of at least $2,000,000, (vi) increases the interest rate to LIBOR plus 4.25% (provided that LIBOR shall not be less than 2.0%) and (vii) revises certain covenants and representations and warranties. Borrower paid CapitalSource a commitment fee of $33,500 in connection with the execution of the Amended and Restated Credit Agreement (CapitalSource credited $25,000 of the amendment fee previously paid by the Borrower in connection with the March 26, 2010 amendment of the Original Credit Agreement towards the commitment fee).

Recent Accounting Pronouncements

The following accounting pronouncements were adopted by the Company during 2009:

On July 1, 2009, the Company adopted the provisions of ASU 2009-05, Fair Value Measurements and Disclosures (Topic 820)—Measuring Liabilities at Fair Value. It had no impact on the Company’s financial condition or results of operations. Under this standard, companies determining the fair value of a liability may use the perspective of an investor that holds the related obligation as an asset. This topic addresses practice difficulties caused by the tension between fair-value measurements based on the price that would be paid to transfer a liability to a new obligor and contractual or legal requirements that prevent such transfers from taking place. No new fair-value measurements are required by the standard.

In May 2009, the Financial Accounting Standards Board issued Topic 855, Subsequent Events. This topic addresses accounting and disclosure requirements related to subsequent events. It requires management to evaluate subsequent events through the date the financial statements are either issued or available to be issued, depending on the company’s expectation of whether it will widely distribute its financial statements to its shareholders and other financial statement users. Companies are required to disclose the date through which subsequent events have been evaluated – see Note B to our consolidated financial statements.

PROSPECTUS SUMMARY		2
SUMMARY CONSOLIDATED FINANCIAL INFORMATION		10
RISK FACTORS		14
FORWARD-LOOKING STATEMENTS		26
SELLING STOCKHOLDERS		27
USE OF PROCEEDS		31
PLAN OF DISTRIBUTION		32
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		33
DESCRIPTION OF BUSINESS		49
PRINCIPAL STOCKHOLDERS		67
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND OTHER STOCKHOLDER MATTERS		71
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		72
DESCRIPTION OF CAPITAL STOCK		74
LEGAL MATTERS		77
EXPERTS		77
AVAILABLE INFORMATION		77
CONSOLIDATED FINANCIAL STATEMENTS OF NEOGENOMICS, INC.		F-i
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION		II-1
INDEMNIFICATION OF DIRECTORS AND OFFICERS		II-1
RECENT SALES OF UNREGISTERED SECURITIES		II-2
EXHIBITS		II-4
UNDERTAKINGS		II-8
SIGNATURES		II-10

	FY 2009		FY 2008		% Increase
Client Requisitions Received (Cases)		31,638		24,780		28	%

Number of Tests Performed		45,675		32,539		40	%

Average Number of Tests/Requisition		1.44		1.31		10	%

Total Testing Revenue	$	29,469,000	$	20,015,000		47	%

Average Revenue/Requisition	$	931	$	808		15	%

Average Revenue/Test	$	645	$	615		5	%

Common Stock Offered	6,500,000 shares by selling stockholders

Offering Price	Market price

Common Stock Currently Outstanding	37,278,667 shares as of April 27, 2010

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” beginning on page 14 for a discussion of these risks.

Over-the-Counter Bulletin Board Symbol	NGNM.OB

	For the three months ended March 31,
	2010			2009
NET REVENUE	$	8,418		$	6,914
COST OF REVENUE		4,344			3,091
GROSS MARGIN		4,074			3,823
OPERATING EXPENSES
General and administrative		2,902			2,341
Sales and marketing		1,763			1,334
Total operating expenses		4,665			3,675

INCOME/ (LOSS) FROM OPERATIONS		(591	)		148

Other income / (expense) – net		(159	)		(115	)

NET INCOME / (LOSS)	$	(750	)	$	33
NET (LOSS) PER SHARE
— Basic	$	(0.02	)	$	0.00
— Diluted	$	(0.02	)	$	0.00
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
— Basic		37,220			32,173
— Diluted		37,220			35,630

	As of
	March 31, 2010			December 31, 2009
	(unaudited)
Assets:
Cash and cash equivalents	$	1,661		$	1,631
Restricted cash		1,000			1,000
Accounts receivable (net of allowance for doubtful accounts of $695 and $589, respectively)		5,492			4,632
Inventories		582			602
Other current assets		515			655
Total current assets		9,250			8,520

Property and equipment (net of accumulated depreciation of $3,202 and $2,787 respectively)		4,882			4,340
Other assets		86			85
Total Assets	$	14,218		$	12,945

Liabilities & Stockholders’ Equity:
Current Liabilities
Account payable	$	1,762		$	1,969
Accrued compensation		1,007			1,308
Accrued expenses and other liabilities		439			465
Short-term portion of equipment capital leases		1,823			1,482
Revolving credit line		2,453			552
Total current liabilities		7,484			5,776

Long-Term Liabilities
Long-term portion of equipment capital leases		1,631			1,526

Total Liabilities		9,115			7,302
Commitments and contingencies

Stockholders’ Equity:
Common Stock, $0.001 par value, (100,000,000 shares authorized; 37,270,055 and 37,185,078 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively)		37			37
Additional paid-in capital		23,972			23,762
Accumulated deficit		(18,906	)		(18,156	)
Total stockholders’ equity		5,103			5,643

Total Liabilities and Stockholders’ Equity	$	14,218		$	12,945

	For the year ended December 31,
	2009			2008
NET REVENUE	$	29,469		$	20,015
COST OF REVENUE		14,254			9,354
GROSS MARGIN		15,215			10,661
OPERATING EXPENSES
General and administrative		10,057			8,179
Sales and marketing		6,886			3,366
Total operating expenses		16,943			11,545

INCOME/ (LOSS) FROM OPERATIONS		(1,728	)		(884	)

Other income / (expense) – net		(515	)		(499	)

NET (LOSS)	$	(2,243	)	$	(1,383	)
NET (LOSS) PER SHARE
— Basic	$	(0.06	)	$	(0.04	)
— Diluted	$	(0.06	)	$	(0.04	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
— Basic		34,639			31,507
— Diluted		34,639			31,507

	As of
	December 31, 2009			December 31, 2008

Assets:
Cash and cash equivalents	$	1,631		$	468
Restricted cash		1,000			-
Accounts receivable (net of allowance for doubtful accounts of $589 and $359, respectively)		4,632			2,914
Inventories		602			491
Other current assets		655			483
Total current assets		8,520			4,356

Property and equipment (net of accumulated depreciation of $2,787 and $1,603 respectively)		4,340			2,875
Other assets		85			64
Total Assets	$	12,945		$	7,295

Liabilities & Stockholders’ Equity:
Current Liabilities
Account payable	$	1,969		$	1,512
Accrued compensation		1,308			737
Accrued expenses and other liabilities		465			358
Short-term portion of equipment capital leases		1,482			637
Revolving credit line		552			1,147
Total current liabilities		5,776			4,391

Long-Term Liabilities
Long-term portion of equipment capital leases		1,526			1,403

Total Liabilities		7,302			5,794
Commitments and contingencies

Stockholders’ Equity:
Common Stock, $0.001 par value, (100,000,000 shares authorized; 37,185,078 and 32,117,008 shares issued and outstanding at December 31, 2009 and 2008, respectively)		37			32
Additional paid-in capital		23,762			17,382
Accumulated deficit		(18,156	)		(15,913	)
Total stockholders’ equity		5,643			1,501

Total Liabilities and Stockholders’ Equity	$	12,945		$	7,295