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SFAS 154 'Accounting Changes and Error Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3

          In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement No. 154. This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for, and reporting of, a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed.

          SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Adoption of this Statement did not have any material impact on our financial statements.

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ITEM 7.                      FINANCIAL STATEMENTS

NEOGENOMICS, INC.

Consolidated Financial Statements as of

 December 31, 2006 and for the years ended

December 31, 2006 and 2005 and

Report of Independent Registered Public Accounting Firm

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                       Page

Report of Independent Registered Public Accounting Firm.		47
Consolidated Balance Sheet as of December 31, 2006.		48
Consolidated Statements of Operations for the years ended December 31, 2006 and 2005.		49
Consolidated Statements of Stockholders’ Equity for the years ended    December 31, 2006 and 2005.		50
Consolidated Statements of Cash Flows for the years ended December 31,   2006 and 2005.		51
Notes to Consolidated Financial Statements.		52

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[Letterhead of Kingery & Crouse, P.A.]

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of NeoGenomics, Inc. and subsidiary:

We have audited the accompanying consolidated balance sheet of NeoGenomics, Inc. and subsidiary  (collectively the “Company”), as of December 31, 2006, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended December 31, 2006 and 2005.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2006, and the results of its operations and its cash flows for the years ended December 31, 2006 and 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/  Kingery & Crouse, P.A.

April 2, 2007

Tampa, FL

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NEOGENOMICS, INC.

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2006

ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	126,266
Accounts receivable (net of allowance for doubtful accounts of $103,463)			1,549,758
Inventories			117,362
Other current assets			102,172
Total current assets			1,895,558
FURNITURE AND EQUIPMENT (net of accumulated depreciation of $494,942)			1,202,487
OTHER ASSETS			33,903
TOTAL ASSETS		$	3,131,948
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	697,754
Accrued compensation			133,490
Accrued expenses and other liabilities			67,098
Due to affiliates (net of discount of $39,285)			1,635,715
Short-term portion of equipment capital leases			94,430
Total current liabilities			2,628,487
LONG TERM LIABILITIES:
Long-term portion of equipment capital leases			448,947
TOTAL LIABILITIES			3,077,434
STOCKHOLDERS’ EQUITY:
Common stock, $.001 par value, (100,000,000 shares authorized; 27,061,476
shares issued and outstanding)			27,061
Additional paid-in capital			11,300,135
Deferred stock compensation			(122,623	)
Accumulated deficit			(11,150,059	)
Total stockholders’ equity			54,514
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	3,131,948

See notes to consolidated financial statements.

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NEOGENOMICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

		2006				2005
NET REVENUE		$	6,475,996			$	1,885,324
COST OF REVENUE			2,759,190				1,132,671
GROSS MARGIN			3,716,806				752,653
OTHER OPERATING EXPENSE
General and administrative			3,576,812				1,553,017
OTHER (INCOME)/EXPENSE:
Other income			(55,970	)			(42	)
Interest expense			325,625				196,838
Other (income)/expense – net			269,655				196,796
NET LOSS		$	(129,661	)		$	(997,160	)
NET LOSS PER SHARE  - Basic and  Diluted		$	(0.00	)		$	(0.04	)
WEIGHTED AVERAGE NUMBER    OF SHARES OUTSTANDING – Basic and Diluted			26,166,031				22,264,435

See notes to consolidated financial statements.

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NEOGENOMICS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

		Common				Common				Additional				Deferred
		Stock				Stock				Paid-In				Stock				Accumulated
		Shares				Amount				Capital				Compensation				Deficit				Total
Balances, December 31, 2004			21,539,416			$	21,539			$	9,603,664			$	(28,620	)		$	(10,023,238	)		$	(426,655	)
Common Stock issuances			1,237,103				1,237				394,763				-				-				396,000
Transaction fees and expenses			-				-				(191,160	)			-				-				(191,160	)
Options issued to Scientific Advisory Board members			-				-				-				2,953				-				2,953
Value of non-qualified stock options			-				-				5,638				(5,638	)			-				-
Warrants issued for services			-				-				187,722				-				-				187,722
Stock issued for services			60,235				60				15,475				-				-				15,535
Deferred stock compensation related to warrants issued for services			-				-				(10,794	)			10,794				-				-
Amortization of deferred stock compensation			-				-				-				17,826				-				17,826
Net loss			-				-				-				-				(997,160	)			(997,160	)
Balances, December 31, 2005			22,836,754				22,836				10,005,308				(2,685	)			(11,020,398	)			(994,939	)
Common Stock issuances for cash			3,530,819				3,531				1,099,469				-				-				1,103,000
Common Stock issued for acquisition			100,000				100				49,900				-				-				50,000
Transaction fees and expenses			-				-				(80,189	)			-				-				(80,189	)
Adjustment of credit facility discount			-				-				2,365								-				2,365
Exercise of stock options and warrants			546,113				546				66,345				-				-				66,891
Warrants and stock issued for services			7,618				8				7,642				-				-				7,650
Payment of Note on Cornell Capital fee			-				-				(50,000	)			-				-				(50,000	)
Stock issued to settle accounts payable			40,172				40				15,627				-				-				15,667
Value of stock option grants			-				-				183,668				(183,668	)			-				-
Stock compensation expense			-				-				-				63,730				-				63,730
Net loss			-				-				-				-				(129,661	)			(129,661	)
Balances, December 31, 2006			27,061,476			$	27,061			$	11,300,135			$	(122,623	)		$	(11,150,059	)		$	54,514

See notes to consolidated financial statements.

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NEOGENOMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

		2006				2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(129,661	)		$	(997,160	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			233,632				123,998
Impairment of fixed assets			53,524				50,000
Amortization of credit facility discounts and debt issue costs			72,956				57,068
Stock based compensation			63,730				-
Non-cash consulting and bonuses			7,650				85,877
Provision for bad debts			444,133				132,633
Other non-cash expenses			59,804				29,576
Changes in current assets and liabilities, net:
Accounts receivable, net			(1,442,791	)			(627,241	)
Inventory			(57,362	)			(44,878	)
Other current assets			(101,805	)			(54,529	)
Deposits			(31,522	)			300
Deferred revenues			(100,000	)			(10,000	)
Accounts payable and accrued expenses             and other liabilities			233,930				352,305
NET CASH USED IN OPERATING ACTIVITIES:			(693,782	)			(902,051	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(398,618	)			(117,628	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliates, net			175,000				760,000
Notes payable			2,000				-
Repayments of capital leases			(58,980	)			-
Debt issue costs			-				(53,587	)
Issuances of common stock for cash, net of transaction expenses			1,089,702				211,662
NET CASH PROVIDED BY FINANCING ACTIVITIES			1,207,722				918,075
NET CHANGE IN CASH AND CASH EQUIVALENTS			115,322				(101,604	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR			10,944				112,548
CASH AND CASH EQUIVALENTS, END OF YEAR		$	126,266			$	10,944
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid		$	269,316			$	136,936
Income taxes paid		$	-			$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment leased under capital leases		$	602,357			$	-
Common stock issued for acquisition			50,000				-
Common stock issued in settlement of financing fees		$	50,000			$	143,208

__________________________________________________________________________________

See notes to consolidated financial statements.

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NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A –FORMATION AND OPERATIONS OF THE COMPANY

NeoGenomics, Inc. (“NEO” or the “Subsidiary”) was incorporated under the laws of the state of Florida on June 1, 2001 and on November 14, 2001 agreed to be acquired by American Communications Enterprises, Inc. (“ACE”, or the “Parent”).  ACE was formed in 1998 and succeeded to NEO’s name on January 3, 2002 (NEO and ACE are collectively referred to as “we”, “us”, “our” or the “Company”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Parent and the Subsidiary.  All significant intercompany accounts and balances have been eliminated in consolidation.

Reclassification

Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to the current year presentation.

Revenue Recognition

Revenue is recognized for services rendered when test results are reported to the ordering physician and the testing process is complete.  The Company’s sales are generally billed to three types of payers – clients, patients and third parties, such as managed care companies, Medicare and Medicaid.  For clients, sales are recorded at the negotiated fee for service rate for each client.  Patient sales are recorded at the Company’s patient fee schedule less any estimated discounts that we deem appropriate for such “self-pay” individuals.  Third party sales are recorded based on established billing rates less estimated discounts and/or contractual allowances.

While we use all available information in the estimation of our net revenues, including our contractual status and historical collection experience with payers, by their nature, adjustments to previously recorded estimated net revenue amounts arise from time-to-time, and are recorded as an adjustment to current period net revenue when such amounts are both probable and estimable.  In almost all cases, such adjustments are not made until the time of final settlement because, until that point, we usually do not have sufficient information that would indicate that an adjustment is warranted.  We continually refine our estimated discounts and contractual allowances on a prospective basis to take new information and/or new payment experiences into consideration in order to make our prospective estimated net revenue as accurate as possible.  As a result, current period adjustments to prior period revenue estimates are not material to the Company’s results of operations or our financial condition in any period presented.  Our revenues also are subject to review and possible audit by the payers.  We believe that adequate provision has been made for any adjustments that may result from final determination of amounts earned under all of the above arrangements.  There are no known material claims, disputes or unsettled matters with any payers that are not adequately provided for in the accompanying consolidated financial statements.

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Accounts Receivable

We record accounts receivable net of estimated discounts and/or contractual allowances at the time that services are performed.  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 and composition 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.

The following table presents the dollars and % of the Company’s net accounts receivable from customers outstanding by aging category at December 31, 2006 and 2005:

 

 

Days Outstanding				2006				% 2006				2005				% 2005
	1-30			$	573,096				36.3	%		$	246,457				43.1	%
	31-60				541,334				34.3	%			167,170				29.2	%
	61-90				212,102				13.4	%			61,828				10.8	%
	91-120				126,284				8.0	%			51,296				9.0	%
>120					125,672				8.0	%			62,155				7.9	%

The table above does not contain approximately $75,000 of accounts receivable from non-customers as of December 31, 2006.  Accounts receivable from customers classified as “self-pay” customers are not material to the total accounts receivable in any period presented.

 

Concentrations of Credit Risk

We currently market our services to pathologists, oncologists, urologists, hospitals and other clinical laboratories.  During 2006, we performed 12,838 individual tests.  Ongoing sales efforts have decreased dependence on any given source of revenue.  Notwithstanding this fact, several key customers still account for a disproportionately large case volume and revenues. In 2005, four customers accounted for 65% of our total revenue.  For the year ended December 31, 2006, three customers represented 61% of our revenue with each party representing greater than 15% of such revenues.  As revenue continues to increase, these concentrations are expected to decease.  In the event that we lost one of these customers, we would potentially lose a significant percentage of our revenues.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents.  We maintain all of our cash and cash equivalents in deposit accounts with several high quality financial institutions, which accounts may at times exceed Federally insured limits.  We have not experienced any losses in such accounts.

Inventories

Inventories, which consist principally of supplies, are valued at the lower of cost (first in, first out method) or market.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of

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contingent assets and liabilities at the date of the consolidated financial statements. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions we are required to make.  Estimates that are critical to the accompanying consolidated financial statements include estimates related to the allowances discussed under Accounts Receivable above as well as estimating depreciation periods of tangible assets, and long-lived impairments, among others.  The markets for our services are characterized by intense price competition, evolving standards and changes in healthcare regulations, all of which could impact the future realizability of our assets.  Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.  It is at least reasonably possible that our estimates could change in the near term with respect to these matters.

Financial Instruments

We believe the book value of our financial instruments included in our current assets and liabilities approximates their fair values due to their short-term nature.

We also believe the book value of our long-term liabilities approximates their fair value as the consideration (i.e. interest and, in certain cases, warrants) on such obligations approximate the consideration at which similar types of borrowing arrangements could be currently obtained.

Furniture and Equipment

Furniture and equipment are stated at cost.  Major additions are capitalized, while minor additions and maintenance and repairs, which do not extend the useful life of an asset, are expensed as incurred. Depreciation is provided using the straight-line method over the assets’ estimated useful lives, which range from 3 to 7 years.

Long-Lived Assets

Statement of Financial Accounting Standards (SFAS) 144, "Accounting for the Impairment or Disposal of Long-Lived Assets” requires that long-lived assets, including certain identifiable intangibles, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets in question may not be recoverable. As a result of experiencing losses from operations, we evaluated our long-lived assets during 2006 and 2005 and determined that certain equipment had a remaining net book value in excess of their fair value (as determined by our management).  Accordingly, we recorded an impairment loss of approximately $54,000 during the year ended December 31, 2006 and $50,000 during the year ended December 31, 2005.

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Income Taxes

We compute income taxes in accordance with Financial Accounting Standards Statement No. 109 "Accounting for Income Taxes" ("SFAS 109").  Under SFAS 109, deferred taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.  Also, the effect on deferred taxes of a change in tax rates is recognized in income in the period that included the enactment date.  Temporary differences between financial and tax reporting arise primarily from the use of different depreciation methods for furniture and equipment as well as impairment losses and the timing of recognition of bad debts.

Stock-Based Compensation

Prior to January 2006, we used Statement of Financial Accounting Standards No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure" (SFAS No. 148) to account for our stock based compensation arrangements.  This statement amended the disclosure provision of FASB statement No. 123 to require prominent disclosure about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation. As permitted by SFAS No. 123 and amended by SFAS No. 148, we continued to apply the intrinsic value method under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," to account for our stock-based employee compensation arrangements.

In December 2004, the Financial Accounting Standards Board issued Statement Number 123 (R) (“SFAS 123 (R)”), Share-Based Payments, which is effective for the reporting period beginning on January 1, 2006. The statement requires us to recognize compensation expense in an amount equal to the fair value of share-based payments such as stock options granted to employees. We had the option to either apply SFAS 123 (R) on a modified prospective method or to restate previously issued financial statements, and chose to utilize the modified prospective method.  Under this method, we are required to record compensation expense (as previous awards continue to vest) for the unvested portion of previously granted awards that remain outstanding at the date of adoption.

In January 2006, we adopted the expense recognition provisions of SFAS 123 (R), and for the year ended December 31, 2006 we recorded approximately $64,000 in stock compensation expense. If we had expensed stock options for the year ended December 31, 2005 the stock compensation expense would have been approximately $25,000.

Statement of Cash Flows

For purposes of the statement of cash flows, we consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Unamortized Discount

Unamortized discount resulting from transaction expenses incurred in the establishment of the Credit Facility (see Note G) is being amortized to interest expense over the contractual life of the Credit Facility (24 months) using the straight line method.

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Net Loss Per Common Share

We compute loss per share in accordance with Financial Accounting Standards Statement No. 128 “Earnings per Share” (“SFAS 128”) and SEC Staff Accounting Bulletin No. 98 (“SAB 98”).  Under the provisions of SFAS No. 128 and SAB 98, basic net loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares outstanding during the period.  Common equivalent shares outstanding as of December 31, 2006 and 2005, which consisted of employee stock options and certain warrants issued to consultants and other providers of financing to the Company, were excluded from diluted net loss per common share calculations as of such dates because they were anti-dilutive.

Recent Pronouncements

SFAS 159 – ‘The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115’

In February 2007, the FASB issued Financial Accounting Standard No. 159 The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 or FAS 159.  This Statement permits entities to choose to measure many financial instruments and certain other items at fair value.  Most of the provisions of this Statement apply only to entities that elect the fair value option.

 

The following are eligible items for the measurement option established by this Statement:

 

 

1.

Recognized financial assets and financial liabilities except:

 

 

a.

An investment in a subsidiary that the entity is required to consolidate

 

 

b.

An interest in a variable interest entity that the entity is required to consolidate

 

 

c.

Employers’ and plans’ obligations (or assets representing net overfunded positions) for pension benefits, other postretirement benefits (including health care and life insurance benefits), postemployment benefits, employee stock option and stock purchase plans, and other forms of deferred compensation arrangements.

 

 

d.

Financial assets and financial liabilities recognized under leases as defined in FASB Statement No. 13, Accounting for Leases.

 

 

e.

Deposit liabilities, withdrawable on demand, of banks, savings and loan associations, credit unions, and other similar depository institutions

 

 

f.

Financial instruments that are, in whole or in part, classified by the issuer as a component of shareholder’s equity (including “temporary equity”). An example is a convertible debt security with a noncontingent beneficial conversion feature.

 

 

2.

Firm commitments that would otherwise not be recognized at inception and that involve only financial instruments

 

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3.

Nonfinancial insurance contracts and warranties that the insurer can settle by paying a third party to provide those goods or services

 

 

4.

Host financial instruments resulting from separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument.

 

 

The fair value option:May be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method

 

 

1.

Is irrevocable (unless a new election date occurs)

 

 

2.

Is applied only to entire instruments and not to portions of instruments.

 

 

The Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements.  We have not yet determined what effect, if any, adoption of this Statement will have on our financial position or results of operations.

 

SFAS 158 – ‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statement Nos. 87, 88, 106, and 132(R)’

In September 2006, the FASB issued Financial Accounting Standard No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statement Nos. 87, 88, 106, and 132(R), or FAS 158. This Statement requires an employer that is a business entity and sponsors one or more single-employer defined benefit plans to (a) recognize the funded status of a benefit plan—measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation—in its statement of financial position; (b) recognize, as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to FAS 87, Employers’ Accounting for Pensions, or FAS 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions; (c) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions); and (d) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition assets or obligations.  An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. Adoption of this statement is not expected to have any material effect on our financial position or results of operations.

SFAS 157 – ‘Fair Value Measurements’

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This standard establishes a standard definition for fair value establishes a framework under generally accepted accounting principles for measuring fair value and expands disclosure requirements for fair value measurements. This standard is effective for financial statements issued for fiscal

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years beginning after November 15, 2007.  Adoption of this statement is not expected to have any material effect on our financial position or results of operations.

SAB 108 – ‘Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements’

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB 108 provides guidance on the consideration of the effects of prior

year unadjusted errors in quantifying current year misstatements for the purpose of a materiality assessment.  Adoption of this statement is not expected to have any material effect on our financial position or results of operations.  

FIN 48 – ‘Accounting for Uncertainty in Income Taxes’

In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109.  FIN 48 prescribes a comprehensive model for how companies should recognize, measure, present and disclose uncertain tax positions taken or expected to be taken on a tax return.  Under FIN 48, we shall initially recognize tax positions in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.  We shall initially and subsequently measure such tax positions as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts.  FIN 48 also revises disclosure requirements to include an annual tabular roll forward of unrecognized tax benefits.  We will adopt this interpretation as required in 2007 and will apply its provisions to all tax positions upon initial adoption with any cumulative effect adjustment recognized as an adjustment to retained earnings. Adoption of this statement is not expected to have any material effect on our financial position or results of operation.

SFAS 156 – ‘Accounting for Servicing of Financial Assets’

In March 2006, the FASB issued SFAS 156, Accounting for Servicing of Financial Assets. This Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This statement:

a.

Requires an entity to recognize a servicing asset or servicing liability each time it   undertakes an obligation to service a financial asset by entering into a servicing contract.

b.

Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.

c.

Permits an entity to choose “Amortization method” or “Fair value measurement method” for each class of separately recognized servicing assets and servicing liabilities.

d.

At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.

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e.

Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

This statement is effective as of the beginning of the Company’s first fiscal year that begins after September 15, 2006.  Adoption of this statement is not expected to have any material effect on our financial position or results of operations.

SFAS 155 – ‘Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140’

This Statement, issued in February 2006, amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.”

This Statement:

a.

Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation

b.

Clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133

c.

Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation

d.

Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives

e.

Amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.

This Statement is effective for all financial instruments acquired or issued after the beginning of our first fiscal year that begins after September 15, 2006.

The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption is permitted as of the beginning of our fiscal year, provided we have not yet issued financial statements, including financial statements for any interim period, for that fiscal year. Provisions of this Statement may be applied to instruments that we hold at the date of adoption on an instrument-by-instrument basis.

Adoption of this statement is not expected to have any material effect on our financial position or results of operations.

Recently Adopted Accounting Standards

SFAS 154 'Accounting Changes and Error Corrections--A Replacement of APB Opinion No. 20 and FASB Statement No. 3

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In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement No. 154. This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for, and reporting of, a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed.

SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Adoption of this Statement did not have any material impact on our financial statements.

Effective January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) requiring that compensation cost relating to share-based payment transactions be recognized in our financial statements.  The specific information on share-based payments are contained in Note E to the financial statements.

NOTE B – LIQUIDITY

Our consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business.   At December 31, 2006, we had stockholders’ equity of approximately $54,000.  Subsequent to December 31, 2006, we enhanced our working capital by issuing 612,051 shares of common stock for $900,000.  We also have the ability to draw up to $3,522,000 available under our Standby Equity Distribution Agreement with Cornell Capital.  As such, we believe we have adequate cash 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.

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NOTE C – FURNITURE AND EQUIPMENT, NET

Furniture and equipment consists of the following at December 31, 2006:

Equipment		$	1,566,330
Leasehold Improvements			12,945
Furniture & Fixtures			118,154
Subtotal		$	1,697,429
Less accumulated depreciation and amortization			(494,942	)
Furniture and Equipment, net		$	1,202,487

Equipment under capital leases, included above, consists of the following at December 31, 2006:

Equipment		$	585,131
Furniture & Fixtures			17,226
Subtotal		$	602,357
Less accumulated depreciation and amortization			(43,772	)
Furniture and Equipment, net		$	558,585

NOTE D - INCOME TAXES

We recognized losses for both financial and tax reporting purposes during 2005, and for financial reporting purposes during 2006 in the accompanying consolidated statements ofoperations.  As we have significant loss carryforwards for tax purposes, no provisions for income taxes and/or deferred income taxes payable have been provided in the accompanying consolidated financial statements.

At December 31, 2006, we have net operating loss carryforwards of approximately $2,100,000 (the significant difference between this amount, and our accumulated deficit of approximately $11,150,000 arises primarily from certain stock based compensation that is considered to be a permanent difference).  Assuming our net operating loss carryforwards are not disallowed because of certain “change in control” provisions of the Internal Revenue Code, these net operating loss carryforwards expire in various years through the year ended December 31, 2026.  However, we have established a valuation allowance to fully reserve our deferred income tax assets as such assets did not meet the required asset recognition standard established by SFAS 109. Our valuation allowance decreased by $200 during the year ended December 31, 2006.

At December 31, 2006, our current and non-current deferred income tax assets (assuming an effective income tax rate of approximately 40%) consisted of the following:

 

Net current deferred income tax asset:
Allowance for doubtful accounts		$	39,900
Less valuation allowance			(39,900	)
Total		$	-

Net non-current deferred income tax asset:
Net operating loss carryforwards		$	816,500
Accumulated depreciation and impairment			(75,600	)
Subtotal			740,900
Less valuation allowance			(740,900	)
Total		$	-

 

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NOTE E - INCENTIVE STOCK OPTIONS AND AWARDS

Effective January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) requiring that compensation cost relating to share-based payment transactions be recognized in our financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award). We adopted SFAS 123R using the modified prospective method and, accordingly, did not restate prior periods to reflect the fair value method of recognizing compensation cost. Under the modified prospective approach, SFAS 123R applies to new awards and to awards that were outstanding on January 1, 2006 that are subsequently modified, repurchased or cancelled.

The shareholders of the Company have approved our Equity Incentive Plan, as amended and restated on October 31, 2006 (the “Plan”), that permits the grant of stock awards and stock options to officers, directors, employees and consultants. Options granted under the plan areeither Incentive Stock Options (“ISOs”) or Non-Qualified Stock Options (“NQSOs”).  Under this Plan, we are authorized to grant awards for up to 12% of our Adjusted Diluted Shares Outstanding (as defined in the Plan), which equated to 3,819,890 shares of our common stock as of December 31, 2006.  As of December 31, 2006, option and stock awards totaling 2,116,667 shares were outstanding.  Options typically have a 10 year life and vest over 3 or 4 years but each grant’s vesting and exercise price provisions are determined by the Board of Directors at the time the awards are granted.

As a result of adopting SFAS 123R on January 1, 2006, we recorded compensation cost related to stock options of approximately $64,000 for the year ended December 31, 2006. As of December 31, 2006, there was approximately $123,000 of total unrecognized compensation costs related to outstanding stock options, which is expected to be recognized over a weighted average period of 1.52 years.

Prior to January 1, 2006, we applied Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations which required compensation costs to be recognized based on the difference, if any, between the quoted market price of the stock on the grant date and the exercise price. As all options granted to employees under such plans had an exercise price at least equal to the market value of the underlying common stock on the date of grant, and given the fixed nature of the equity instruments, no stock-based employee compensation cost relating to stock options was

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reflected in net income (loss). If we had expensed stock options for the year ended December 31, 2005 our net loss and pro forma net loss per share amounts would have been reflected as follows:

		2005
Net loss:
As reported		$	(997,160	)
Pro forma		$	(1,022,550	)

Loss per share:
As reported		$	(0.04	)
Pro forma		$	(0.05	)

We use the Black-Scholes option-pricing model to estimate fair value of stock-based awards. The fair value of options granted during 2006 was estimated on the date of the grants using the following approximate assumptions: dividend yield of 0 %, expected volatility of 12% - 44% (depending on the date of issue), risk-free interest rate of 4.5% – 4.6% (depending on the date of issue), and an expected life of 3 or 4 years.

SEC Staff Accounting Bulletin 107 (SAB 107) requires that the estimate of fair value used in valuing employee equity options should reflect the assumptions marketplace participants would use in determining how much to pay for an instrument on the date of the measurement (generally the grant date for equity awards).  We calculate expected volatility for our employee stock options by first looking at the range of implied volatilities embedded within the option contracts of the larger companies in our industry that have listed exchange-traded option contracts outstanding on their common stock.  We believe this range of implied volatilities comprises the upper and lower limits of what a marketplace participant would use in valuing our employee stock options if such options were transferable and not subject to the vesting requirements of employee stock options.  Then, in order to factor in developments that arespecific to NeoGenomics, we measure the recent volatility of our own stock price over the 3 month period preceding the option grant date by taking the standard deviation of the stock price for such period and dividing it by the average stock price for the same period to arrive at a measure of recent volatility.  If this measure of volatility is within the reference range, we use it as our estimate of future volatility in the Black-Scholes option pricing model.  If it is below or above the reference range, we use the minimum or the maximum of the reference range, accordingly, as our estimate of future volatility.

We believe that since the Company’s financial condition and prospects continue to improve significantly on a quarterly and annual basis, no reasonable market participants would value NeoGenomics stock options, if there were any such options that traded on a public exchange, by using expected future volatility estimates based on anything other than recent market information.  This conclusion is based on our Principal Financial Officer’s previous experience as a senior executive in one of the largest over the counter options trading firms in the U.S. and his intimate knowledge of how professional investors value exchange-traded options.  As such we do not believe that using historical volatility information from anything other than the most recent 3 month period prior to a grant date as the basis for estimating future volatility is consistent with the provisions of SAB 107.  Therefore, over the last four years we have consistently estimated future volatility in determining the fair value of employee options based on the three month period prior to any given grant date.  The risk-free interest rate we use in determining the fair value of equity awards under the Black Scholes model is the equivalent

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U.S. Treasury yield in effect at the time of grant for an instrument with a similar expected life as the option.

The status of our stock options and stock awards are summarized as follows:

		Number				Weighted Average
		Of Shares				Exercise Price
Outstanding at December 31, 2004			882,329			$	0.16
Granted			1,442,235				0.27
Exercised			(42,235	)			0.00
Canceled			(482,329	)			0.09
Outstanding at December 31, 2005			1,800,000				0.27
Granted			1,010,397				0.69
Exercised			(211,814	)			0.31
Canceled			(481,916	)			0.41
Outstanding at December 31, 2006			2,116,667				0.43
Exercisable at December 31, 2006			1,155,166			$	0.28

The following table summarizes information about our options outstanding at December 31, 2006:

								Weighted Average
Exercise Price				Number Outstanding				Remaining Contractual Life (in years)				Options Exercisable				Weighted Average Exercise Price
$	0.00-0.30				1,289,000				7.9				1,032,500			$	0.25
$	0.31-0.46				188,417				7.4				73,916			$	0.34
$	0.47-0.71				406,250				9.5				28,750			$	0.62
$	0.72-1.08				85,000				9.7				0			$	0.00
$	1.09-1.64				148,000				9.9				20,000			$	1.30
					2,116,667								1,155,166

The weighted average fair value of options granted during 2006 was approximately $130,000 or $0.13. The total intrinsic value of options (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) exercised during 2006 was approximately $214,000 or $1.03 per option share exercised. During the year ended December 31, 2006, the amount of cash received from the exercise of stock options was approximately $64,000. The total fair value of shares vested during the year is $37,000.

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NOTE F – COMMITMENTS AND CONTINGENCIES

Operating Leases

In August 2003, we entered into a three year lease for 5,200 square feet at our laboratory facility in Fort Myers, Florida.  On June 29, 2006 we signed an amendment to the original lease which extended the lease through June 30, 2011.  The amendment included the rental of an additional 4,400 square feet adjacent to our current facility.   This space will allow for future expansion of our business. The lease was further amended on January 17, 2007 but this amendment did not materially alter the terms of the lease, which has total payments of approximately $653,000 over the remaining life of the lease, including annual increases of rental payments of 3% per year.  Such amount excludes estimated operating and maintenance expenses and property taxes.

As part of the acquisition of The Center for CytoGenetics, Inc. by the Company on April 18, 2006, we assumed the lease of an 850 square foot facility in Nashville, Tennessee.  The lease expires on August 31, 2008.  The average monthly rental expense is approximately $1,350 per month.  This space was not adequate for our future plans and the Company is currently not using the facility and is actively trying to sublease this facility.  On June 15, 2006, we entered into a lease for a new facility totaling 5,386 square feet of laboratory space in Nashville, Tennessee. This space will be adequate to accommodate our current plans for the Tennessee laboratory. As part of the lease, we have the right of first refusal on an additional 2,420 square feet, if needed, directly adjacent to the facility.  The lease is a five year lease and results in total payments by us of approximately $340,000.

On August 1, 2006, the Company entered into a lease for 1,800 square feet of laboratory space in Irvine, California. The lease is a nine month lease and results in total payments by the Company of approximately $23,000.  This lease will expire on April 30, 2007. We are currently in negotiations on a new larger facility, which can accommodate our future growth.

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Future minimum lease payments under these leases as of December 31, 2006 are as follows:

Years ending December 31,		Amounts
2007		$	227,082
2008			219,471
2009			214,015
2010			219,907
2011			105,710
Total minimum lease payments		$	986,185

Capital Leases

During 2006, we entered into the following capital leases:

Date	Type		Months				Cost				Monthly Payment				Balance at December 31
March 2006	Laboratory Equipment			60			$	134,200			$	2,692			$	117,117
August 2006	Laboratory Equipment			60				48,200				1,200				43,724
August 2006	Laboratory Equipment			60				98,400				2,366				90,140
August 2006	Laboratory Equipment			60				101,057				2,316				89,630
August 2006	Laboratory Equipment			60				100,200				2,105				86,740
November 2006	Laboratory Equipment			60				19,900				434				19,348
November 2006	Computer Equipment			60				9,700				228				9,366
December 2006	Computer Equipment			48				19,292				549				17,742
December 2006	Computer Equipment			48				25,308				718				24,003
December 2006	Office Equipment			60				46,100				994				45,567
Total							$	602,357			$	13,602			$	543,377

Future minimum lease payments under these leases as of December 31, 2006 are as follows:

Years ending December 31,		Amounts
2007		$	163,219
2008			163,219
2009			163,219
2010			161,951
2011			89,582
Total future minimum lease payments			741,190
Less amount representing interest			197,813
Present value of future minimum lease payments			543,377
Less current maturities			94,430
Obligations under capital leases – long term		$	448,947

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The furniture and equipment covered under the lease agreements (see Note C) is pledged as collateral to secure the performance of the future minimum lease payments above.

Legal Contingency

On October 26, 2006, Accupath Diagnostics Laboratories, Inc. d/b/a US Labs (“US Labs”) filed a complaint in the Superior Court of the State of California for the County of Los Angeles naming as defendants the Company and its president, Robert Gasparini.  Also individually named are Company employees Jeffrey Schreier, Maria Miller, Douglas White and Gary Roche.

The complaint alleges the following causes of action:  1) Misappropriation of Trade Secrets; 2) Tortious Interference with Prospective Economic Advantage; 3) Unfair Competition (Common Law); and 4) Unfair Competition (Cal. Bus. & Prof. Code section 17200).  The allegations are the result of the Company's hiring four salespeople who were formerly employed by US Labs.  Specifically, US Labs alleges that the Company had access to the US Labs salaries of the new hires, and was therefore able to obtain them as employees.

US Labs also sought broad injunctive relief against NeoGenomics preventing the Company from doing business with its customers.  US Labs requests were largely denied, but the court did issue a much narrower preliminary injunction that prevents NeoGenomics from soliciting the four new employees' former US Labs customers until trial.

Discovery commenced in December 2006.  While the Company received unsolicited and inaccurate salary information for three individuals that were ultimately hired, no evidence of misappropriation of trade secrets has been discovered by either side.  As such, the Company is currently contemplating filing motions to narrow or end the litigation, and expects to ultimately prevail at trial.

We believe that none of US Labs’ claims will be affirmed at trial; however, even if they were, NeoGenomics does not believe such claims would result in a material impact to our business.  .

Purchase Commitment

On June 22, 2006, we entered into an agreement to purchase three automated FISH signal detection and analysis systems over the next 24 months for a total of $420,000.  We agreed to purchase two systems immediately and to purchase a third system in the next 15 months if the vendor is able to make certain improvements to its system.  As of December 31, 2006, the Company had purchased and installed 2 of the systems.

Employment Contracts

On December 14, 2004, we entered into an employment agreement with Robert P. Gasparini to serve as our President and Chief Science Officer. The employment agreement has an initial term of three years, effective January 3, 2005; provided, however that either party may terminate the agreement by giving the other party sixty days written notice. The employment agreement specifies an initial base salary of $150,000/year, with specified salary increases to $185,000/year over the first 18 months of the contract. Mr. Gasparini is also entitled to receive cash bonuses for any given fiscal year in an amount equal to 15% of his base salary if he meets certain targets established by the Board of Directors. In addition, Mr. Gasparini was granted 1,000,000 Incentive Stock Options that have a ten year term so long as Mr. Gasparini remains an employee of the Company (these options, which vest according to the passage of time and

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other performance-based milestones, resulted in us recording stock based compensation expense beginning in 2005). Mr. Gasparini's employment agreement also specifies that he is entitled to four weeks of paid vacation per year and other health insurance and relocation benefits. In the event that Mr. Gasparini is terminated without cause by the Company, the Company has agreed to pay Mr. Gasparini's base salary and maintain his employee benefits for a period of six months.

NOTE G- OTHER RELATED PARTY TRANSACTIONS

During 2006 and 2005, Steven C. Jones, a director of the Company, earned $71,000 and $51,000, respectively, in cash for various consulting work performed in connection with his duties as Acting Principal Financial Officer.

During 2006, George O’Leary, a director of the Company, earned $20,900 in cash for various management consulting work performed for the Company.

On April 15, 2003, we entered into a revolving credit facility with MVP 3, LP (“MVP 3”), a partnership controlled by certain of our shareholders.  Under the terms of the agreement MVP 3, LP agreed to make available to us up to $1.5 million of debt financing with a stated interest rate of prime + 8% and such credit facility had an initial maturity of March 31, 2005.  At December 31, 2004, we owed MVP 3, approximately $740,000 under this loan agreement.  This obligation was repaid in full through a refinancing on March 23, 2005.

On March 23, 2005, we entered into an agreement with Aspen Select Healthcare, LP (formerly known as MVP 3, LP) (“Aspen”) to refinance our existing indebtedness of $740,000 and provide for additional liquidity of up to $760,000 to the Company.  Under the terms of the agreement, Aspen, a Naples, Florida-based private investment fund made available to us up to $1.5 million (subsequently increased to $1.7 million, as described below) of debt financing in the form of a revolving credit facility (the “Credit Facility”) with an initial maturity of March 31, 2007.  Aspen is managed by its General Partner, Medical Venture Partners, LLC, which is controlled by a director of NeoGenomics.  We incurred $53,587 of transaction expenses in connection with establishing the Credit Facility, which have been capitalized and are being amortized to interest expense over the term of the agreement.  As part of this transaction, we issued a five year warrant to Aspen to purchase up to 2,500,000 shares of common stock at an initial exercise price of $0.50/share, all of which are currently vested.  We estimated the fair value of this warrant to be $131,337 as of the original commitment date by using the Black-Scholes pricing model using the following approximate assumptions: spot price of $0.35/share, dividend yield of 0 %, expected volatility of 22.7%, risk-free interest rate of 4.5%, and a term of 5 years.  We recorded this $131,337 value of such Warrant as a discount to the face amount of the Credit Facility.  The Company is amortizing such discount to interest expense over the 24 months of the Credit Facility.  As of December 31, 2006, $1,700,000 was available for use and $1,675,000 had been drawn.

In addition, as a condition to these transactions, the Company, Aspen and certain individual shareholders agreed to amend and restate their shareholders’ agreement to provide that Aspen will have the right to appoint up to three of seven of our directors and one mutually acceptable independent director.  We also entered into an amended and restated Registration Rights Agreement, dated March 23, 2005 with Aspen and certain individual shareholders, which grants to Aspen certain demand registration rights (with no provision for liquidated damages) and which grants to all parties to the agreement, piggyback registration rights.

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On January 18, 2006, the Company entered into a binding letter agreement (the "Aspen Agreement") with Aspen Select Healthcare, LP, which provided, among other things, that:

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

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

(c) Aspen and the Company amended the Loan Agreement, dated March 23, 2005 (the "Loan Agreement") between the parties to extend the maturity date until September 30, 2007 and to modify certain covenants (such Loan Agreement as amended, the "Credit Facility Amendment").

 (d) Aspen had the right, until April 30, 2006, to provide up to $200,000 of additional secured indebtedness to the Company under the Credit Facility Amendment and to receive a five year warrant to purchase up to 450,000 shares of the Company's common stock with an exercise price of $0.26/share (the "New Debt Rights").On March 30, 2006, Aspen exercised its New Debt Rights and entered into the definitive transaction documentation for the Credit Facility Amendment and other such documents required under the Aspen Agreement.

(e) The Company agreed to amend and restate the warrant agreement, dated March 23, 2005, to provide that all 2,500,000 warrant shares (the "Existing Warrants") were vested and the exercise price per share was reset to $0.31 per share.

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

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

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

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

On March 11, 2005, we entered into an agreement with HCSS, LLC and eTelenext, Inc. to enable NeoGenomics to use eTelenext, Inc’s Accessioning Application, AP Anywhere Application and CMQ Application.  HCSS, LLC is a holding company created to build a small laboratory network for the 50 small commercial genetics laboratories in the United States.  HCSS, LLC is owned 66.7% by Dr. Michael T. Dent, our Chairman.  Under the terms of the agreement, the Company paid $22,500 over three months to customize this software and will pay an annual membership fee of $6,000 per year and monthly transaction fees of between $2.50 - $10.00 per completed test, depending on the volume of tests performed.  The eTelenext system is an elaborate laboratory information system (LIS) that is in use at many larger laboratories.  By assisting in the formation of the small laboratory network, the Company will be able to increase the productivity of its technologists and have on-line links to other small laboratories in the network in order to better manage its workflow.

NOTE H – EQUITY FINANCING TRANSACTIONS

On January 3, 2005, we issued 27,288 shares of common stock under the Company’s 2003 Equity Incentive Plan to two employees of the Company in satisfaction of $6,822 of accrued, but unpaid, vacation.

During the period from January 1, 2005 to May 31, 2005, we sold 522,382 shares of our common stock in a series of private placements at $0.30 per share and $0.35 per share to unaffiliated third party investors. These transactions generated net proceeds to the Company of approximately $171,000.

On June 6, 2005, we entered into a Standby Equity Distribution Agreement with Cornell Capital Partners, LP (“Cornell”).  Pursuant to the Standby Equity Distribution Agreement, the Company may, at its discretion, periodically sell to Cornell shares of common stock for a total purchase price of up to $5.0 million.  For each share of common stock purchased under the Standby Equity Distribution Agreement, Cornell will pay the Company 98% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board or other principal market on which the Company’s common stock is traded for the 5 days immediately following the notice date (the “Purchase Price”).  The total number of shares issued to Cornell under each advance request will be equal to the total dollar amount of the advance request divided by the Purchase Price determined during the five day pricing period.  Cornell will also retain 5% of each advance under the Standby Equity Distribution Agreement.  Cornell’s obligation to purchase shares of the Company’s common stock under the Standby Equity Distribution Agreement is subject to certain conditions, including the Company maintaining an effective registration statement for shares of common stock sold under the Standby Equity Distribution Agreement and is limited to $750,000 per weekly advance.  The amount and timing of all advances under the Standby Equity Distribution Agreement are at the discretion of the Company and the Company is not obligated

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to issue and sell any securities to Cornell, unless and until it decides to do so.  Upon execution of the Standby Equity Distribution Agreement, Cornell received 381,888 shares of the Company’s common stock as a commitment fee under the Standby Equity Distribution Agreement.  The Company also issued 27,278 shares of the Company’s common stock to Spartan Securities Group, Ltd. under a placement agent agreement relating to the Standby Equity Distribution Agreement.

On July 28, 2005, we filed an amended SB-2 registration statement with the Securities and Exchange Commission to register 10,000,000 shares of our common stock related to the Standby Equity Distribution Agreement.  Such registration statement became effective as of August 1, 2005.

On June 6, 2006 as a result of not terminating our Standby Equity Distribution Agreement  with Cornell,  a short-term note payable in the amount of $50,000 became due to Cornell and was subsequently paid in July 2006.

The following sales of common stock have been made under our Standby Equity Distribution Agreement with Cornell since it was first declared effective on August 1, 2005.

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Request	Completion		Shares of				Gross				Cornell				Escrow				Net
Date	Date		Common Stock				Proceeds				Fee				Fee				Proceeds				ASP(1)
8/29/2005	9/8/2005			63,776			$	25,000			$	1,250			$	500			$	23,250
12/10/2005	12/18/2005			241,779				50,000				2,500				500				47,000
Subtotal – 2005				305,555			$	75,000			$	3,750			$	1,000			$	70,250			$	0.25
7/19/2006	7/28/2006			83,491				53,000				2,500				500				50,000
8/8/2006	8/16/2006			279,486				250,000				12,500				500				237,000
10/18/2006	10/23/2006			167,842				200,000				10,000				500				189,500
Subtotal – 2006				530,819			$	503,000			$	25,000			$	1,500			$	476,500			$	0.95
12/29/2006	1/10/2007			98,522				150,000				7,500				500				142,000
1/16/2007	1/24/2007			100,053				150,000				7,500				500				142,000
2/1/2007	2/12/2007			65,902				100,000				5,000				500				94,500
2/19/2007	2/28/2007			166,611				250,000				12,500				500				237,000
2/28/2007	3/7/2007			180,963				250,000				12,500				500				237,000
Subtotal – 2007 YTD				612,051			$	900,000			$	45,000			$	2,500			$	852,500			$	1.47
Total  Since Inception				1,448,425			$	1,478,000			$	73,750			$	5,000			$	1,399,250			$	1.02
Remaining				-			$	3,522,000				-				-				-
Total Facility				-			$	5,000,000				-				-				-

(1)  Average Selling Price of shares issued

On July 1, 2005, we issued 14,947 shares of our common stock under the Company’s 2003 Equity Incentive Plan to two employees of the Company in satisfaction of $4,933 of accrued, but unpaid vacation.

On December 15, 2005, we issued 18,000 shares of common stock under the Company’s 2003 Equity Incentive Plan to employees of the Company as part of a year-end bonus program.  The shares were issued at a price of $0.21/share and resulted in an expense to the Company of $3,780.

On January 18, 2006, the Company entered into a binding letter agreement (the "Aspen Agreement") with Aspen Select Healthcare, LP, as described in Note G.

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

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

NOTE I – SUBSEQUENT EVENT

On April 2, 2007, we concluded an agreement with Power3 Medical Products, Inc., a New York Corporation (“Power3”) regarding the formation of a joint venture Contract Research Organization (“CRO”) and the issuance of convertible debentures and related securities by Power3 to us.  Power3 is an early stage company engaged in the discovery, development, and commercialization of protein biomarkers.  Under the terms of the agreement, NeoGenomics and Power3 will jointly own a CRO and begin commercializing Power3’s intellectual property portfolio of 17 patents pending by developing diagnostic tests and other services around one or more of the 523 protein biomarkers that Power3 believes it has discovered to date.  Power3 has agreed to license all of its intellectual property on a non-exclusive basis to the CRO for selected commercial applications as well as provide certain management personnel.  We will provide access to cancer samples, management and sales & marketing personnel, laboratory facilities and working capital.  Subject to final negotiation, we will own a minimum of 60% and up to 80% of the new CRO venture which is anticipated to be launched in the third or fourth quarter of FY 2007.

As part of the agreement, we will provide $200,000 of working capital to Power3 by purchasing a convertible debenture on or before April 16, 2007.  We were also granted two options to increase our stake in Power3 to up to 60% of the Power3 fully diluted shares outstanding.  The first option (the “First Option”) is a fixed option to purchase convertible preferred stock of Power3 that is convertible into such number of shares of Power3 common stock, in one or more transactions, up to 20% of Power3’s voting common stock at a purchase price per share, which will also equal the initial conversion price per share, equal to the lesser of a) $0.20/share, or b) an equity valuation of $20,000,000 divided by the fully-diluted shares outstanding on the date of the exercise of the First Option.  This First Option is exercisable for a period starting on the date of purchase of the convertible debenture by NeoGenomics and extending until the day which is the later of a) November 16, 2007 or b) the date that certain milestones specified in the agreement have been achieved.  The First Option is exercisable in cash or NeoGenomics common stock at our option, provided, however, that we must include at least $1.0 million of cash in the consideration if we elect to exercise this First Option.  In addition to purchasing convertible preferred stock as part of the First Option, we are also entitled to receive that number of warrants which is equal to the same percentage as the percentage of convertible preferred stock being purchased on such day of Power3’s warrants and options .  Such warrants will have an exercise price equal to the initial conversion price of the convertible

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preferred stock that was purchased  and will have a five year term.

The second option (the “Second Option”), which is only exercisable to the extent that we have exercised the First Option, provides that we will have the option to increase our stake in Power3 to up to 60% of fully diluted shares of Power3 over the twelve month period beginning on the expiration date of the First Option in one or a series of transactions by purchasing additional convertible preferred stock of Power3 that is convertible into voting common stock and receiving additional warrants.  The purchase price per share, and the initial conversion price of the Second Option convertible preferred stock will, to the extent such Second Option is exercised within six (6) months of exercise of the First Option, be the lesser of a) $0.40/share or b) an equity price per share equal to $40,000,000 divided by the fully diluted shares outstanding on the date of any purchase.  The purchase price per share, and the initial conversion price of the Second Option convertible preferred stock will, to the extent such Second Option is exercised after six (6) months, but within twelve (12) months of exercise of the First Option, be the lesser of a) $0.50/share or b) an equity price per share equal to $50,000,000 divided by the fully diluted shares outstanding on the date of any purchase.   The exercise price of the Second Option may be paid in cash or in any combination of cash and our common stock at our option.  In addition to purchasing convertible preferred stock as part of the Second Option, we are also entitled to receive that number of warrants which is equal to the same percentage as the percentage of convertible preferred stock being purchased on such day of Power3’s warrants and options.  Such warrants will have an exercise price equal to the initial conversion price of the convertible preferred stock being purchased that date and will have a five year term.

End of Financial Statements

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ITEM 8.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

    Not applicable.

ITEM 8A.                      CONTROLS AND PROCEDURES

(A)           Evaluation Of Disclosure Controls And Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s Principal Executive Officer, Principal Accounting Officer and Acting Principal Financial Officer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving the Company’s disclosure control objectives. The Company’s Principal Executive Officer and Acting Principal Financial Officer have concluded that the Company’s disclosure controls and procedures are, in fact, effective at this reasonable assurance level as of the period covered.  In addition, the Company reviewed its internal controls, and there have been no significant changes in its internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation or from the end of the reporting period to the date of this Form 10-KSB.

(B)           Changes In Internal Controls Over Financial Reporting

In connection with the evaluation of the Company’s internal controls during the Company’s fourth fiscal quarter ended December 31, 2006, the Company’s Principal Executive Officer, Principal Accounting Officer and Acting Principal Financial Officer have determined that there are no changes to the Company’s internal controls over financial reporting that has materially affected, or is reasonably likely to materially effect, the Company’s internal controls over financial reporting.

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PART III

ITEM 9.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The following table sets forth certain information regarding our members of the Board of Directors and other executives as of March 15, 2007:

Name	Age	Position
Board of Directors:
Robert P. Gasparini	52	President and Chief Science Officer,      Board Member
Steven C. Jones	43	Acting Principal Financial Officer,      Board Member
Michael T. Dent	42	Chairman of the Board
George G. O’Leary	44	Board Member
Peter M. Peterson	50	Board Member
Other Executives:
Robert J. Feeney	39	Vice President of Sales and Marketing
Matthew William Moore	33	Vice President of Research and Development
Jerome J. Dvonch	38	Principal Accounting Officer

There are no family relationships between or among the members of the Board of Directors or other executives.  With the exception of Mr. Peterson, the directors and other executives of the Company are not directors or executive officers of any company that files reports with the SEC.  Mr. Peterson also serves as Chairman of the Board of Innovative Software Technologies, Inc. (OTC BB:  INIV).   None of the members of the Board of Directors or other executives has been involved in any bankruptcy proceedings, criminal proceedings, any proceeding involving any possibility of enjoining or suspending members of the Company’s Board of Directors or other executives from engaging in any business, securities or banking activities, and have not been found to have violated, nor been accused of having violated, any federal or state securities or commodities laws.

Members of the Company’s Board of Directors are elected at the annual meeting of stockholders and hold office until their successors are elected. The Company’s officers are appointed by the Board of Directors and serve at the pleasure of the Board and are subject to employment agreements, if any, approved and ratified by the Board.

Robert P. Gasparini, M.S.– President and Chief Science Officer, Board Member

Mr. Gasparini is the President and Chief Science Officer of NeoGenomics.  Prior to assuming the role of President and Chief Science Officer, Mr. Gasparini was a consultant to the Company since May 2004.  Prior to NeoGenomics, Mr. Gasparini was the Director of the Genetics Division for US Pathology Labs, Inc. (“US Labs”) from January 2001 to December

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2004.  During this period, Mr. Gasparini started the Genetics Division for US Labs and grew annual revenues of this division to $30 million over a 30 month period.  Prior to US Labs, Mr. Gasparini was the Molecular Marketing Manager for Ventana Medical Systems from 1999 to 2001.  Prior to Ventana, Mr. Gasparini was the Assistant Director of the Cytogenetics Laboratory for the Prenatal Diagnostic Center from 1993 to 1998 an affiliate of Mass General Hospital and part of Harvard University.  While at the Prenatal Diagnostic Center, Mr. Gasparini was also an Adjunct Professor at Harvard University.  Mr. Gasparini is a licensed Clinical Laboratory Director and an accomplished author in the field of Cytogenetics.  He received his BS degree from The University of Connecticut in Biological Sciences and his Master of Health Science degree from Quinnipiac University in Laboratory Administration.

Steven C. Jones– Acting Principal Financial Officer, Board Member

Mr. Jones has served as a director since October 2003.  He is a Managing Director in Medical Venture Partners, LLC, a venture capital firm established in 2003 for the purpose of making investments in the healthcare industry.  Mr. Jones is also the co-founder and Chairman of the Aspen Capital Group and has been President and Managing Director of Aspen Capital Advisors since January 2001.  Prior to that Mr. Jones was a chief financial officer at various public and private companies and was a Vice President in the Investment Banking Group at Merrill Lynch & Co.  Mr. Jones received his B.S. degree in Computer Engineering from the University of Michigan in 1985 and his MBA from the Wharton School of the University of Pennsylvania in 1991. He is also Chairman of the Board of Quantum Health Systems, LLC and T3 Communications, LLC.

Michael T. Dent M.D.– Chairman of the Board

Dr. Dent is our founder and Chairman of the Board. Dr. Dent was our President and Chief Executive Officer from June 2001, when he founded NeoGenomics, to April 2004.  From April 2004 until April 2005, Dr. Dent served as our President and Chief Medical Officer.  Dr. Dent founded the Naples Women's Center in 1996 and continues his practice to this day.  He received his training in Obstetrics and Gynecology at the University of Texas in Galveston. He received his M.D. degree from the University of South Carolina in Charleston, S.C. in 1992 and a B.S. degree from Davidson College in Davidson, N.C. in 1986. He is a member of the American Association of Cancer Researchers and a Diplomat and fellow of the American College of Obstetricians and Gynecologists.  He sits on the Board of the Florida Life science Biotech Initiative.

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George G. O’Leary– Board Member

Mr. O’Leary is a Director of NeoGenomics and is currently running his own consulting firm, SKS Consulting of South Florida Corp. where he consults for NeoGenomics as well as several other companies.  Prior to that he was President of US Medical Consultants, LLC.  Prior to assuming his duties with US Medical, he was a consultant to the company and acting Chief Operating Officer. Prior to NeoGenomics, Mr. O’Leary was the President and CFO of Jet Partners, LLC from 2002 to 2004. During that time he grew annual revenues from $12 million to $17.5 million. Prior to Jet Partners, Mr. O’Leary was CEO and President of Communication Resources Incorporated (CRI) from 1996 to 2000.  During that time he grew annual revenues from $5 million to $40 million. Prior to CRI, Mr. O’Leary held various positions including VP of Operations for Cablevision Industries from 1987 to 1996. Mr. O’Leary was a CPA with Peat Marwick Mitchell from 1984 to 1987. He received his BBA in Accounting from Siena College in Albany, New York.

Peter M. Peterson– Board Member

Mr. Peterson is a Director of NeoGenomics and is the founder of Aspen Capital Partners, LLC which specializes in capital formation, mergers & acquisitions, divestitures, and new business start-ups.  Mr. Peterson is also the Chairman and Founder of CleanFuel USA and the Chairman of Innovative Software Technologies (OTCBB:  INIV).  Prior to forming Aspen Capital Partners, Mr. Peterson was Managing Director of Investment Banking with H. C. Wainwright & Co.  Prior to Wainwright, Mr. Peterson was president of First American Holdings and Managing Director of Investment Banking.  Previous to First American, he served in various investment banking roles and was the co-founder of ARM Financial Corporation.  Mr. Peterson was one of the key individuals responsible for taking ARM Financial public on the OTC market and the American Stock Exchange.  Under Mr. Peterson’s financial leadership, ARM Financial Corporation was transformed from a diversified holding company into a national clinical laboratory company with 14 clinical laboratories and ancillary services with over $100 million in assets.  He has also served as an officer or director for a variety of other companies, both public and private.  Mr. Peterson earned a Bachelor of Science degree in Business Administration from the University of Florida.

Robert J. Feeney, Ph.D – Vice President of Sales and Marketing

Mr. Feeney has served as Vice President of Sales and Marketing since January 3, 2007.  Prior to NeoGenomics, he served in a dual capacity as the Director of Marketing and the Director of Scientific & Clinical Affairs for US Labs, a division of Laboratory Corporation of America (LabCorp).  Prior to that, Dr. Feeney held a variety of roles including the National Manager of Clinical Affairs and the Central Regional Sales Manager position where he managed up to 33% of the sales force.  In his first full year with US Labs, he grew revenue from $1 million to $17 million in this geography. Prior to US Labs, Dr. Feeney was employed with Eli Lilly and Company as an Associate Marketing Manager and with Impath Inc., now a wholly owned division of Genzyme Genetics, where he held various positions including Regional Sales Manager and District Sales Manager assignments.  Dr. Feeney has over 14 years of sales and marketing experience with 17 years in the medical industry.  Dr. Feeney received his Bachelors of Science degree in Biology from Dickinson College and his doctoral degree in Cellular and Developmental Biology from the State University of New York.

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Matthew William Moore, Ph.D. – Vice President of Research and Development

Mr. Moore has served as Vice President of Research and Development since July 2006. Prior to that he served as Vice President of Research and Development for Combimatrix Molecular Diagnostics, a subsidiary of Combimatrix Corporation, a biotechnology company, developing novel microarray, Q-PCR and Comparative Genomic Hybridization based diagnostics. Prior to Combimatrix Molecular Diagnostics, he served as a senior scientist with US Labs, a division of Laboratory Corporation of America (LabCorp) where he was responsible for the initial implementation of the Molecular in Situ Hybridization and Molecular Genetics programs. Mr. Moore received his Bachelors of Science degree in Biotechnology, where he graduated with honors and his doctoral degree from the University of New South Wales, Australia.

Jerome J. Dvonch – Director of Finance, Principal Accounting Officer

Mr. Dvonch has served as Director of Finance since August 2005 and as Principal Accounting Officer since August 2006.  From June 2004 through July 2005, Mr. Dvonch was Associate Director of Financial Planning and Analysis with Protein Design Labs, a bio-pharmaceutical company.  From September 2000 through June 2004, Mr. Dvonch held positions of increasing responsibility including Associate Director of Financial Analysis and Reporting with Exelixis, Inc., a biotechnology company.   He also was Manager of Business Analysis for Pharmchem Laboratories, a drug testing laboratory.  Mr. Dvonch has extensive experience in strategic planning, SEC reporting and accounting in the life science industry.  He also has experience in mergers and acquisitions and with debt/equity financing transactions.  Mr. Dvonch is a Certified Public Accountant and received his M.B.A. from the Simon School of Business at the University of Rochester.  He received his B.B.A. in accounting from Niagara University.

Audit Committee

Currently, the Company’s Audit Committee of the Board of Directors is comprised of Steven C. Jones and George O’Leary.  The Board of Directors believes that both Mr. Jones and Mr. O’Leary are “financial experts” (as defined in Regulation 228.401(e)(1)(i)(A) of Regulation S-B).  Mr. Jones is a Managing Member of Medical Venture Partners, LLC, which serves as the general partner of Aspen Select Healthcare LP, a partnership which controls approximately 36.1% of the voting stock of the Company.  Thus Mr. Jones would not be considered an “independent” director under Item 7(d)(3)(iv) of Schedule 14A of the Securities Exchange Act of 1934 (the “Act”).  However, Mr. O’Leary would be considered an “independent” director under Item 7(d)(3)(iv) of Schedule 14A of the Act.

Compensation Committee

Currently, the Company’s Compensation Committee of the Board of Directors is comprised of the Board Members except for Mr. Gasparini.

Code of Ethics

The Company adopted a Code of Ethics for its senior financial officers and the principal executive officer during 2004 as published in our 10-KSB dated April 15, 2005.

 

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ITEM 10.

EXECUTIVE COMPENSATION

The following table provides certain summary information concerning compensation paid by the Company to or on behalf of our most highly compensated executive officers for the fiscal years ended December 31, 2006, 2005, and 2004:

Summary Compensation Table

Name and Principal Capacity		Year				Salary								Other Compensation
Robert P. Gasparini President & Chief Science Officer			2006 2005 2004			$	183,500  $162,897  $ 22,500				(3	)		$	87,900 $28,128 --				(1	)(2)
Jerome Dvonch Principal Accounting Officer			2005 2004 2003			$	92,846 $ 35,890 -							$	20,850 13,441 -				(4	)(5)
Steven Jones Acting Principal Financial Officer and Director			2006 2005 2004			$	71,000 $ 51,000 $ 72,500				(6	)(6)(6)			- - -

 

(1)	Mr. Gasparini had other income from the exercise of 90,000 stock options.

 

 

(2)	Mr. Gasparini moved to Florida from California during 2005 and this represents his relocation expenses paid by the Company.

 

 

(3)	Mr. Gasparini was appointed as President and Chief Science Officer on January 3, 2005.  During 2004, he acted as a consultant to the Company and the amounts indicated represent his consulting income.

 

 

(4)	Mr. Dvonch had other income from the exercise of 15,000 stock options.

 

 

(5)	Mr. Dvonch moved to Florida from California during 2005 and this represents his relocation expenses paid by the Company.

 

Mr. Jones has acted as a consultant to the Company and the amounts indicated represent his consulting income.

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ITEM 11.                      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of March 29, 2007, with respect to each person known by the Company to own beneficially more than 5% of the Company’s outstanding common stock, each director and officer of the Company and all directors and executive officers of the Company as a group.  The Company has no other class of equity securities outstanding other than common stock.

 

Title of Class	Name And Address Of Beneficial Owner	Amount and Nature Of Beneficial Ownership	Percent Of Class(1)
Common	Aspen Select Healthcare, LP (2) 1740 Persimmon Drive Naples, Florida 34109	13,553,279	43.38%
Common	Steven C. Jones (3) 1740 Persimmon Drive Naples, Florida 34109	14,110,577	45.12%
Common	Michael T. Dent M.D. (4) 1726 Medical Blvd. Naples, Florida 34110	2,731,492	9.70%
Common	George O’Leary (5) 6506 Contempo Lane Boca Raton, Florida 33433	200,000	0.72%
Common	Robert P. Gasparini (6) 20205 Wildcat Run Estero, FL 33928	712,500	2.46%
Common	Peter M. Peterson (7) 2402 S. Ardson Place Tampa, FL  33629	13,553,279	43.38%
Common	SKL Family Limited Partnership (8) 984 Oyster Court Sanibel, FL 33957	2,900,000	10.14%
Common	Robert J. Feeney 7359 Fox Hollow Ridge Zionsville, IN 46077	15,625	-
Common	Matthew W. Moore 3751 Pine Street Irvine, Ca 92606	14,375	_-
Common	Jerome J. Dvonch 11169 Lakeland Circle Fort Myers, FL 33913	38,416	-
Common	Directors and Officers as a Group (2 persons)	17,754,569	54.39%

 

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(1)           Beneficial ownership is determined in accordance within the rules of the Commission and generally includes voting of investment power with respect to securities.  Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of March 29, 2006 are deemed to be beneficially owned by the person holding such options for the purpose of computing thepercentage of ownership of such persons, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

(2)           Aspen Select Healthcare, LP (“Aspen”) has direct ownership of 10,003,279 shares and has certain warrants with 3,550,000 shares currently exercisable.  The general partner of Aspen is Medical Venture Partners, LLC, an entity controlled by Steven C. Jones.

(3)           Steven C. Jones, director of the Company, has direct ownership of 530,000 shares and currently exercisable warrants to purchase an additional 27,298 shares, but as a member of the general partner of Aspen, he has the right to vote all shares held by Aspen, thus 10,533,279 shares and 3,577,298 currently exercisable warrant shares have been added to his total.

(4)           Michael T. Dent, a director of the Company, has direct ownership of 2,258,535 shares, currently exercisable warrants to purchase 72,992 shares, and currently exercisable options to purchase 400,000 shares.

(5)           George O’Leary, a director of the Company, has direct ownership of 200,000 warrants, of which 150,000 are currently exercisable.  He also has options to purchase 50,000 shares, of which 50,000 shares are currently exercisable.

(6)           Robert Gasparini, President of the Company, has direct ownership of 15,000 shares, and has 935,000 options to purchase shares, of which 697,500 are currently exercisable.

(7)           Peter M. Peterson is a member of the general partner of Aspen and has the right to vote all shares held by Aspen.  Thus 10,003,279 shares and 3,550,000 currently exercisable warrant shares have been added to his total.  Mr. Peterson does not own any other stock of the Company except through his affiliation with Aspen.

(8)           SKL Family Limited Partnership has direct ownership of 2,000,000 shares and currently exercisable warrants to purchase 900,000 shares.

(9)           Robert J. Feeney, Vice President of Sales and Marketing, has 275,000 options to purchase shares, of which 15,625 are currently exercisable.

(10)           Matthew W. Moore, Vice President of Research and Development, has 105,000 options to purchase shares, of which 14,375 are currently exercisable.

(11)           Jerome J. Dvonch, Principal Accounting Officer, has 150,000 options to purchase shares, of which 38,416 shares are currently exercisable.

 

 

ITEM 12.                      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 2006 and 2005, Steven C. Jones, a director of the Company, earned $70,667 and $51,000, respectively, in cash for various consulting work performed connection with his duties as Acting Principle Financial Officer.

During 2006, George O’Leary, a director of the Company, earned $20,900 in cash formanagement consulting work performed for the Company.On January 18, 2006, George O’Leary, a director received from the Company 50,000 incentive stock options at $0.26 per share in compensation for services related to the Equity and Debt Financing the company completed in January 2006.

On April 15, 2003, we entered into a revolving credit facility with MVP 3, LP (“MVP 3”), a partnership controlled by certain of our shareholders.  Under the terms of the agreement MVP 3, LP agreed to make available up to $1.5 million of debt financing with a stated interest rate of prime + 8% and such credit facility had an initial maturity of March 31, 2005.  At December 31, 2004, we owed MVP 3, approximately $740,000 under this loan agreement.  This obligation was repaid in full through a refinancing on March 23, 2005.

On March 23, 2005, we entered into an agreement with Aspen Select Healthcare, LP (formerly known as MVP 3, LP) (“Aspen”) to refinance our existing indebtedness of $740,000 and provide for additional liquidity of up to $760,000 to the Company.  Under the terms of the agreement, Aspen, a Naples, Florida-based private investment fund made available up to $1.5 million (subsequently increased to $1.7 million, as described below) of debt financing in the form of a revolving credit facility (the “Credit Facility”) with an initial maturity of March 31, 2007.  Aspen is managed by its General Partner, Medical Venture Partners, LLC, which is controlled by a director of NeoGenomics.  We incurred $53,587 of transaction expenses in connection with establishing the Credit Facility, which have been capitalized and are being amortized to interest expense over the term of the agreement.  As part of this transaction, we issued a five year warrant to Aspen to purchase up to 2,500,000 shares of common stock at an initial exercise price of $0.50/share, all of which are currently vested.  We estimated the fair value of this warrant to be $131,337 as of the original commitment date by using the Black-Scholes pricing model using the following approximate assumptions: spot price of $0.35/share, dividend yield of 0 %, expected volatility of 22.7%, risk-free interest rate of 4.5%, and a term of 5 years.  We recorded this $131,337 value of such Warrant as a discount to the face amount of the Credit Facility.  The Company is amortizing such discount to interest expense over the 24 month of the Credit Facility.  As of December 31, 2005, $1,700,000 was available for use and $1,675,000 had been drawn.

On January 18, 2006, the Company entered into a binding letter agreement (the "Aspen Agreement") with Aspen Select Healthcare, LP, which provided, among other things, that:

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

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

(c) Aspen and the Company amended the Loan Agreement, dated March 23, 2005 (the "Loan Agreement") between the parties to extend the maturity date until September 30, 2007 and to modify certain covenants (such Loan Agreement as amended, the "Credit Facility Amendment").

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 (d) Aspen had the right, until April 30, 2006, to provide up to $200,000 of additional secured indebtedness to the Company under the Credit Facility Amendment and to receive a five year warrant to purchase up to 450,000 shares of the Company's common stock with an exercise price of $0.26/share (the "New Debt Rights").On March 30, 2006, Aspen exercised its New Debt Rights and entered into the definitive transaction documentation for the Credit Facility Amendment and other such documents required under the Aspen Agreement.

(e) The Company agreed to amend and restate the warrant agreement, dated March 23, 2005, to provide that all 2,500,000 warrant shares (the "Existing Warrants") were vested and the exercise price per share was reset to $0.31 per share.

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

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

We borrowed an additional $100,000 from the Aspen credit facility in May 2006, $25,000 in September 2006 and $50,000 in December 2006.  At December 31, 2006, $1,675,000 was outstanding on the credit facility, which bears interest at prime plus 6%, and $25,000 remained available.  Subsequent to December 31, 2006 we borrowed the remaining $25,000 available under the Aspen Facility.

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

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

On March 11, 2005, we entered into an agreement with HCSS, LLC and eTelenext, Inc. to enable NeoGenomics to use eTelenext, Inc’s Accessioning Application, AP Anywhere Application and CMQ Application.  HCSS, LLC is a holding company created to build a small laboratory network for the 50 small commercial genetics laboratories in the United States.  HCSS, LLC is owned 66.7% by Dr. Michael T. Dent, our Chairman.  By becoming the first customer of HCSS in the small laboratory network, the Company saved approximately $152,000 in up front licensing fees.  Under the terms of the agreement, the Company paid $22,500 over three months to customize this software and will pay an annual membership fee of $6,000 per year and monthly transaction fees of between $2.50 - $10.00 per completed test, depending on the volume of tests performed.  The eTelenext system is an elaborate laboratory information system (LIS) that is in use at many larger labs.  By assisting in the formation of the small laboratory network, the Company will be able to increase the productivity of its technologists and have on-line links to other small labs in the network in order to better manage its workflow.

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PART IV

ITEM 13.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

 

 (a)           Exhibits

 

EXHIBIT NO.	DESCRIPTION	FILING REFERENCE
3.1	Articles of Incorporation, as amended	(i)
3.2	Amendment to Articles of Incorporation filed with the Nevada Secretary of State on January 3, 2003.	(ii)
3.3	Amendment to Articles of Incorporation filed with the Nevada Secretary of State on April 11, 2003.	(ii)
3.4	Amended and Restated Bylaws, dated April 15, 2003.	(ii)
10.1	Amended and Restated Loan Agreement between NeoGenomics, Inc. and Aspen Select Healthcare, L.P., dated March 30, 2006	(iii)
10.2	Amended and Restated Registration Rights Agreement between NeoGenomics, Inc. and Aspen Select Healthcare, L.P. and individuals dated March 23, 2005	(iv)
10.3	Guaranty of NeoGenomics, Inc., dated March 23, 2005	(iv)
10.4	Stock Pledge Agreement between NeoGenomics, Inc. and Aspen Select Healthcare, L.P., dated March 23, 2005	(iv)
10.5	Amended and Restated Warrant Agreement between NeoGenomics, Inc. and Aspen Select Healthcare, L.P., dated January 21, 2006	(iii)
10.6	Amended and Restated Security Agreement between NeoGenomics, Inc. and Aspen Select Healthcare, L.P., dated March 30, 2006	(iii)
10.7	Employment Agreement, dated December 14, 2005, between Mr. Robert P. Gasparini and the Company	(v)
10.8	Registration Rights Agreement between NeoGenomics, Inc. and Aspen Select Healthcare, L.P., dated March 30, 2006	(iii)
10.9	Warrant Agreement between NeoGenomics, Inc. and SKL Family Limited Partnership, L.P. issued January 23, 2006	(iii)
10.10	Warrant Agreement between NeoGenomics, Inc. and Aspen Select Healthcare, L.P. issued March 14, 2006	(iii)
10.11	Warrant Agreement between NeoGenomics, Inc. and Aspen Select Healthcare, L.P. issued March 30, 2006	(iii)
10.12	Amended and Restated NeoGenomics Equity Incentive Plan, dated October 31, 2006	(vi)
10.13	NeoGenomics Employee Stock Purchase Plan, dated October 31, 2006	(vi)
10.14	Agreement with Power3 Medical Products, Inc regarding the Formation of Joint Venture & Issuance of Convertible Debenture and Related Securities	Provided herewith
14.1	NeoGenomics, Inc. Code of Ethics for Senior Financial Officers and the Principal Executive Officer	(v)
31.1	Certification by Principal Executive Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Provided herewith
31.2	Certification by Principal Financial Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Provided herewith
31.3	Certification by Principal Accounting Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Provided herewith
32.1	Certification by Principal Executive Office, Principal Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Provided herewith
(i)	Incorporated by reference to the Company’s Registration Statement on Form SB-2, filed February 10, 1999.
(ii)	Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2002, filed May 20, 2003.
(iii)	Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005, filed April 3, 2006.
(iv)	Incorporated by reference to the Company’s Report on Form 8-K, filed March 30, 2005.
(v)	Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2004, filed April 15, 2005.
(vi)	Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2006, filed November 17, 2006.

 

 

ITEM 14.                      PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Summarized below is the aggregate amount of various professional fees billed by our principal accountants with respect to our last two fiscal years:

		2006				2005
Audit fees		$	32,000			$	28,000
Audit-related fees		$	—			$	—
Tax fees		$	3,000			$	2,000
All other fees, including tax consultation         and preparation		$	9,000			$	—

 

 

All audit fees are approved by our Audit Committee and Board of Directors.  Other than income tax preparation services, Kingery & Crouse, P.A. does not provide any non-audit services to the Company.

 

85

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

September 11, 2007.

 

NeoGenomics, Inc.

By: _/s/ Robert P. Gasparini__________

Robert P. Gasparini

President and

Principal Executive Officer

Date:                      September 11 , 2007

By: _/s/ Steven C. Jones

Steven C. Jones

Acting Principal Financial Officer

Date:                      September 11, , 2007

By: _/s/ Jerome Dvonch__________

Jerome Dvonch

Principal Accounting Officer

Date:                      September 11, 2007

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE                                                                                  TITLE                                                      DATE

 

 /s/ Michael T. Dent                                           Chairman of the Board                             September 11, 2007

Michael T. Dent, M.D.

/s/ Robert P. Gasparini                                                       President and Director                             September 11, 2007

Robert P. Gasparini

/s/ Steven C. Jones                                                             Director                                               September 11, 2007

Steven C. Jones

    

/s/ George O’Leary                                                             Director                                               September 11, 2007

George O’Leary

/s/ Peter M. Petersen                                                          Director                                               September 11, 2007

Peter Petersen

 

/s/William J. Robison                                                         Director                                                        September 11, 2007

William J. Robison

 

/s/ Marvin E. Jaffe                                                               Director                                                       September 11, 2007
Marvin E. Jaffe

 

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EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert P. Gasparini, Principal Executive Officer, certify that:

1.           I have reviewed this annual report on Form 10-KSB/A of NeoGenomics, Inc.;

 

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

 

4.           The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the small business issuer and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed  under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Omitted;

(c)

Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.           The small business issuer’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date:                     September 11, 2007	By:           /s/ Robert P. Gasparini
	Name:                      Robert P. Gasparini
	Title:           President and Principal Executive Officer

*The introductory portion of paragraph 4 of the Section 302 certification that refers to the certifying officers’ responsibility for establishing and maintaining internal control over financial reporting for the company, as well as paragraph 4(b), have been omitted in accordance with Release No. 33-8545 (March 2, 2005) because the compliance period has been extended for small business issuers until the first fiscal year ending on or after December 15, 2007.

 

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EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven C. Jones, Principal Financial Officer, certify that:

1.           I have reviewed this annual report on Form 10-KSB/A of NeoGenomics, Inc.;

 

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

 

4.           The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the small business issuer and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed  under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Omitted;

(c)

Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.           The small business issuer’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date:                      September 11, 2007	By:           /s/ Steven C. Jones
	Name:                      Steven C. Jones
	Title:           Acting Principal Financial Officer

*The introductory portion of paragraph 4 of the Section 302 certification that refers to the certifying officers’ responsibility for establishing and maintaining internal control over financial reporting for the company, as well as paragraph 4(b), have been omitted in accordance with Release No. 33-8545 (March 2, 2005) because the compliance period has been extended for small business issuers until the first fiscal year ending on or after December 15, 2007.

 

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EXHIBIT 31.3

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jerome J. Dvonch, Principal Accounting Officer, certify that:

1.           I have reviewed this annual report on Form 10-KSB/A of NeoGenomics, Inc.;

 

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

 

4.           The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the small business issuer and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed  under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Omitted;

(c)

Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.           The small business issuer’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date:           September 11, 2007	By:           /s/ Jerome J. Dvonch
	Name:                      Jerome J. Dvonch
	Title:           Principal Accounting Officer

*The introductory portion of paragraph 4 of the Section 302 certification that refers to the certifying officers’ responsibility for establishing and maintaining internal control over financial reporting for the company, as well as paragraph 4(b), have been omitted in accordance with Release No. 33-8545 (March 2, 2005) because the compliance period has been extended for small business issuers until the first fiscal year ending on or after December 15, 2007.

 

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EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of NeoGenomics, Inc. (the “Company”) on Form 10-KSB/A for the fiscal year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:       September 11, 2007                           ______/s/ Robert P. Gasparini_____

 Robert P. Gasparini

       President and

       Principal Executive Officer

Date:        September 11, 2007                            ______/s/ Steven C. Jones__

 Steven C. Jones

       Acting Principal Financial Officer

Date:       September 11, 2007                            ______/s/ Jerome J. Dvonch__

 Jerome J. Dvonch

 Principal Accounting Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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