UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021

2022
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to                  
Commission File Number: 001-35756
NEOGENOMICS, INC.
(Exact name of registrant as specified in its charter)
 
Nevada 74-2897368
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
12701 Commonwealth Drive,Suite 9,9490 NeoGenomics Way,Fort Myers, 
Florida 3391333912
(Address of principal executive offices) (Zip Code)
 
(239) 768-0600
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock ($0.001 par value)NEOThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or fordfor such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  S No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  S   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerSAccelerated filer☐
Non-accelerated filer☐Smaller Reporting Company☐
 Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐   No  S
As of May 4, 2021,6, 2022, the registrant had 117,926,709124,758,179 shares of Common Stock, par value $0.001 per share outstanding.



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FORWARD-LOOKING STATEMENTS
The information in thisThis Quarterly Report on Form 10-Q contains “forward-looking statements” and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the “Securities Act”, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”, which are subject to the “safe harbor” created by those sections.forward-looking statements. These forward-looking statements include, but aregenerally can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intends,” “may,” “plan,” “potential,” “project,” “will,” “would” and similar expressions, although not limited to,all forward-looking statements concerning ourcontain these identifying words. These forward-looking statements address various matters, including the Company’s strategy, future operations, future financial position, future revenues, changing reimbursement levels from government payers and private insurers, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2021.2022, and in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.

Forward-looking statements include, but are not limited to, statements about:
•Our ability to respond to rapid scientific change;
•The risk of liability in conducting clinical trials and providing research services and the sufficiency of our insurance to cover such claims;
•Our ability to implement our business strategy;
•The anticipatedpotential impact to our business operations, customer demand and supply chain due to the recentongoing global COVID-19 coronavirus pandemic of a novel strain of the coronavirus;and its related variants;
•The expected reimbursement levels from governmental payers and private insurers and proposed changes to those levels;
•The application, to our business and the services we provide, of existing laws, rules and regulations, including without limitation, Medicare laws, anti-kickback laws, Health Insurance Portability and Accountability Act of 1996 regulations, state medical privacy laws, international privacy laws, federal and state false claims laws and corporate practice of medicine laws;
•Regulatory developments in the United States including downward pressure on health care reimbursement;
•Our ability to maintain our license under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”);
•Food and Drug Administration, or FDA regulation of Laboratory Developed Tests (“LDTs”);
•Failure to timely or accurately bill for our services;
•Our ability to expand our operations and increase our market share;
•Our ability to expand our service offerings by adding new testing capabilities and overcome capacity constraints;
•Our ability to develop or acquire licenses for new or improved testing technologies;
•Our ability to meet our future capital requirements;
•Our ability to manage our indebtedness;
•Our ability to manage the quality of our investment portfolio;
•Our expectations regarding the conversion of our outstanding 1.25% Convertible Senior Notes due May 2025 (the “2025 Convertible Notes”) or our outstanding 0.25% Convertible Senior Notes due January 2028 (the “2028 Convertible Notes”) in the aggregate principal amount of $201.3 million and $345$345.0 million, respectively, and our ability to make debt service payments under the 2025 Convertible Notes or 2028 Convertible Notes if such notes are not converted;
•Our ability to have sufficient cash to pay our obligations under the 2025 Convertible Notes or the 2028 Convertible Notes;
•The dilutive impact of the conversion of the 2025 Convertible Notes or the 2028 Convertible Notes;
•Our ability to protect our intellectual property from infringement;
•Our ability to integrate future acquisitions and costs related to such acquisitions;
3

•The effects of seasonality on our business;
•Our ability to maintain service levels and compete with other diagnostic laboratories;
3

•Our ability to hire and retain sufficient managerial, sales, clinical and other personnel to meet our needs;
•Our ability to successfully scale our business, including expanding our facilities, our backup systems and infrastructure;
•Our handling, storage and disposal of biological and hazardous materials;
•The accuracy of our estimates regarding reimbursement, expenses, future revenues and capital requirements; and
•Our ability to manage expenses and risks associated with international operations, including anti-corruption and trade sanction laws and other regulations, and economic, political, legal and other operational risks associated with foreign jurisdictions;jurisdictions.
•Our ability to have sufficient cash to pay our obligations under the 2025 Convertible Notes or the 2028 Convertible Notes; and
•The dilutive impact of the conversion of the 2025 Convertible Notes or the 2028 Convertible Notes.
Any forward-looking statement speaksstatements included in this Quarterly Report on Form 10-Q speak only as of the date on which such statement is made,of this report, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.statements


4

PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEOGENOMICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)data)
March 31, 2022
(unaudited)		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents$305,896 $316,827 
Marketable securities, at fair value175,534 198,563 
Accounts receivable, net110,796 112,130 
Inventories23,840 23,395 
Prepaid assets14,341 12,354 
Assets held for sale— 10,050 
Other current assets20,693 8,189 
Total current assets651,100 681,508 
Property and equipment (net of accumulated depreciation of $116,254 and $109,952, respectively)108,942 109,465 
Operating lease right-of-use assets101,955 102,197 
Intangible assets, net433,835 442,325 
Goodwill527,115 527,115 
Other assets6,600 7,168 
Total non-current assets1,178,447 1,188,270 
Total assets$1,829,547 $1,869,778 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable$20,481 $17,921 
Accrued compensation32,320 38,304 
Accrued expenses and other liabilities16,571 17,796 
Current portion of equipment financing obligations621 1,135 
Current portion of operating lease liabilities5,958 6,884 
Pharma contract liabilities6,119 5,192 
Total current liabilities82,070 87,232 
Long-term liabilities
Convertible senior notes, net533,189 532,483 
Operating lease liabilities73,434 72,289 
Deferred income tax liabilities, net51,709 55,475 
Other long-term liabilities14,141 14,022 
Total long-term liabilities672,473 674,269 
     Total liabilities$754,543 $761,501 
Commitments and contingencies (Note 11)00
Stockholders’ equity
Common stock, $0.001 par value, (250,000,000 shares authorized; 124,722,215 and 124,107,500 shares issued and outstanding, respectively)$125 $124 
Additional paid-in capital1,142,133 1,123,628 
Accumulated other comprehensive loss(3,009)(638)
Accumulated deficit(64,245)(14,837)
     Total stockholders’ equity$1,075,004 $1,108,277 
     Total liabilities and stockholders’ equity$1,829,547 $1,869,778 
March 31, 2021 (unaudited)December 31, 2020
ASSETS
Current assets
Cash and cash equivalents$611,970 $228,713 
Marketable securities, at fair value190,710 67,546 
Accounts receivable, net102,922 106,843 
Inventories21,382 29,526 
Prepaid assets11,073 11,547 
Other current assets4,675 4,555 
Total current assets942,732 448,730 
Property and equipment (net of accumulated depreciation of $98,746 and $92,895, respectively)94,315 85,873 
Operating lease right-of-use assets50,904 45,786 
Intangible assets, net118,195 120,653 
Goodwill211,083 211,083 
Restricted cash11,119 21,919 
Investment in non-consolidated affiliate29,555 29,555 
Loan receivable from non-consolidated affiliate10,185 0 
Prepaid lease asset21,052 20,229 
Other assets5,273 4,503 
Total non-current assets$551,681 $539,601 
Total assets$1,494,413 $988,331 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable$18,919 $24,965 
Accrued compensation23,621 24,727 
Accrued expenses and other liabilities14,018 11,654 
Current portion of equipment financing obligations2,089 2,841 
Current portion of operating lease liabilities5,111 4,967 
Pharma contract liabilities3,992 4,029 
Total current liabilities67,750 73,183 
Long-term liabilities
Convertible senior notes, net530,378 168,120 
Equipment financing obligations683 967 
Operating lease liabilities46,437 42,296 
Deferred income tax liabilities, net1,744 5,415 
Other long-term liabilities3,707 4,056 
Total long-term liabilities582,949 220,854 
     Total liabilities650,699 294,037 
Stockholders’ equity
Common stock, $0.001 par value, (250,000,000 shares authorized; 117,136,654 and 112,075,474 shares issued and outstanding, respectively)117 112 
Additional paid-in capital872,350 701,357 
Accumulated other comprehensive (loss) income(150)10 
Accumulated deficit(28,603)(7,185)
     Total stockholders’ equity843,714 694,294 
     Total liabilities and stockholders' equity$1,494,413 $988,331 

See the accompanying notes to the unaudited Consolidated Financial Statements.
5

NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)data)
(unaudited)
 Three Months Ended March 31,
 20222021
NET REVENUE  
Clinical Services$98,791 $96,487 
Pharma Services18,378 19,046 
Total net revenue117,169 115,533 
COST OF REVENUE78,937 73,959 
GROSS PROFIT38,232 41,574 
Operating expenses:
General and administrative66,248 40,476 
Research and development7,713 2,456 
Sales and marketing16,299 13,749 
Total operating expenses90,260 56,681 
LOSS FROM OPERATIONS(52,028)(15,107)
Interest (income) expense, net1,301 1,177 
Other (income) expenses, net(168)4,854 
Loss before taxes(53,161)(21,138)
Income tax (benefit) expense(3,753)976 
NET LOSS$(49,408)$(22,114)
NET LOSS PER SHARE
Basic$(0.40)$(0.19)
Diluted$(0.40)$(0.19)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic123,630 116,199 
Diluted123,630 116,199 

 Three Months Ended March 31,
 20212020
NET REVENUE:  
Clinical Services$96,487 $92,982 
Pharma Services19,046 13,048 
Total revenue115,533 106,030 
COST OF REVENUE73,959 59,661 
GROSS PROFIT41,574 46,369 
Operating expenses:
General and administrative40,476 36,344 
Research and development2,456 2,060 
Sales and marketing13,749 13,258 
Total operating expenses56,681 51,662 
LOSS FROM OPERATIONS(15,107)(5,293)
Interest expense, net1,177 819 
Other expense (income), net4,854 (223)
Loss before taxes(21,138)(5,889)
Income tax expense976 1,089 
NET LOSS$(22,114)$(6,978)
NET LOSS PER SHARE
Basic$(0.19)$(0.07)
Diluted$(0.19)$(0.07)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic116,199 104,484 
Diluted116,199 104,484 

See the accompanying notes to the unaudited Consolidated Financial Statements.
6

NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)

Three Months Ended March 31,Three Months Ended March 31,
2021202020222021
NET LOSSNET LOSS$(22,114)$(6,978)NET LOSS$(49,408)$(22,114)
OTHER COMPREHENSIVE LOSS:OTHER COMPREHENSIVE LOSS:OTHER COMPREHENSIVE LOSS:
Net unrealized loss on marketable securities, net of taxNet unrealized loss on marketable securities, net of tax(160)0 Net unrealized loss on marketable securities, net of tax(2,371)(160)
Unrealized loss on effective cash flow hedge, net of tax0 (1,038)
Total other comprehensive loss, net of tax Total other comprehensive loss, net of tax(160)(1,038) Total other comprehensive loss, net of tax(2,371)(160)
COMPREHENSIVE LOSSCOMPREHENSIVE LOSS$(22,274)$(8,016)COMPREHENSIVE LOSS$(51,779)$(22,274)

See the accompanying notes to the unaudited Consolidated Financial Statements.


7

NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands, except share amounts)data)
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) Income(Accumulated Deficit) Retained EarningsTotal
SharesAmount
Balance, December 31, 2021124,107,500 $124 $1,123,628 $(638)$(14,837)$1,108,277 
Common stock issuance ESPP Plan47,853 — 971 — — 971 
Issuance of restricted stock, net of forfeitures100,253 — (1,049)— — (1,049)
Issuance of common stock for stock options466,609 1 6,479 — — 6,480 
ESPP expense— — 249 — — 249 
Stock-based compensation expense - options and restricted stock— — 11,855 — — 11,855 
Net unrealized loss on marketable securities, net of tax— — — (2,371)— (2,371)
Net loss— — — — (49,408)(49,408)
Balance, March 31, 2022124,722,215 $125 $1,142,133 $(3,009)$(64,245)$1,075,004 

Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeAccumulated DeficitTotal
SharesAmount
Balance, December 31, 2019104,781,236 $105 $520,278 $(1,618)$(11,357)$507,408 
Common stock issuance ESPP Plan34,330 — 796 — — 796 
Issuance of restricted stock, net of forfeitures76,618 — (212)— — (212)
Issuance of common stock for stock options503,873 — 2,897 — — 2,897 
Stock issuance fees and expenses— — (15)— — (15)
ESPP expense— — 194 — — 194 
Stock-based compensation expense - options and restricted stock— — 1,991 — — 1,991 
Unrealized loss on effective cash flow hedge, net of tax— — — (1,038)— (1,038)
Net loss— — — — (6,978)(6,978)
Balance, March 31, 2020105,396,057 $105 $525,929 $(2,656)$(18,335)$505,043 
Balance, December 31, 2020Balance, December 31, 2020112,075,474 $112 $701,357 $10 $(7,185)$694,294 Balance, December 31, 2020112,075,474 $112 $701,357 $10 $(7,185)$694,294 
Cumulative-effect adjustment from change in accounting principleCumulative-effect adjustment from change in accounting principle— — (23,271)— 696 (22,575)Cumulative-effect adjustment from change in accounting principle— — (23,271)— 696 (22,575)
Premiums paid for capped call confirmationsPremiums paid for capped call confirmations— — (29,291)— — (29,291)Premiums paid for capped call confirmations— — (29,291)— — (29,291)
Common stock issuance ESPP PlanCommon stock issuance ESPP Plan23,917 — 1,024 — — 1,024 Common stock issuance ESPP Plan23,917 — 1,024 — — 1,024 
Issuance of restricted stock, net of forfeituresIssuance of restricted stock, net of forfeitures83,220 — (614)— — (614)Issuance of restricted stock, net of forfeitures83,220 — (614)— — (614)
Issuance of common stock for stock optionsIssuance of common stock for stock options260,167 — 2,239 — — 2,239 Issuance of common stock for stock options260,167 — 2,239 — — 2,239 
Issuance of common stock - public offering, net of underwriting discountsIssuance of common stock - public offering, net of underwriting discounts4,693,876 5 218,495 — — 218,500 Issuance of common stock - public offering, net of underwriting discounts4,693,876 5 218,495 — — 218,500 
Stock issuance fees and expensesStock issuance fees and expenses— — (242)— — (242)Stock issuance fees and expenses— — (242)— — (242)
ESPP expenseESPP expense— — 241 — — 241 ESPP expense— — 241 — — 241 
Stock-based compensation expense - options and restricted stockStock-based compensation expense - options and restricted stock— — 2,412 — — 2,412 Stock-based compensation expense - options and restricted stock— — 2,412 — — 2,412 
Net unrealized loss on marketable securities, net of taxNet unrealized loss on marketable securities, net of tax— — — (160)— (160)Net unrealized loss on marketable securities, net of tax— — — (160)— (160)
Net lossNet loss— — — — (22,114)(22,114)Net loss— — — — (22,114)(22,114)
Balance, March 31, 2021Balance, March 31, 2021117,136,654 $117 $872,350 $(150)$(28,603)$843,714 Balance, March 31, 2021117,136,654 $117 $872,350 $(150)$(28,603)$843,714 
See the accompanying notes to the unaudited Consolidated Financial Statements.

8

NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) 
(unaudited) 
 Three Months Ended March 31,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(22,114)$(6,978)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation6,680 6,240 
Amortization of intangibles2,458 2,452 
Non-cash stock-based compensation2,653 2,186 
Non-cash operating lease expense1,862 2,021 
Amortization of convertible debt discount593 0 
Amortization of debt issue costs43 70 
Unrealized loss on investment in non-consolidated affiliate5,024 0 
Interest receivable on loan receivable from non-consolidated affiliate(209)0 
Write-off of COVID-19 PCR testing inventory and equipment6,061 0 
Other non-cash items548 17 
Changes in assets and liabilities, net
Accounts receivable, net3,921 (5,722)
Inventories2,845 (5,348)
Prepaid lease asset(823)(3,316)
Prepaid and other assets(794)254 
Accounts payable, accrued and other liabilities(6,538)1,191 
Net cash provided by (used in) operating activities2,210 (6,933)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities(137,776)0 
Proceeds from sales and maturities of marketable securities13,919 0 
Purchases of property and equipment(15,831)(4,708)
Business acquisition0 (37,000)
Loan receivable from non-consolidated affiliate(15,000)0 
Net cash used in investing activities(154,688)(41,708)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of equipment financing obligations(1,091)(1,598)
Repayment of term loan0 (1,250)
Issuance of common stock, net2,617 3,465 
Proceeds from issuance of convertible debt, net of issuance costs334,410 0 
Premiums paid for capped call confirmations(29,291)0 
Proceeds from equity offering, net of issuance costs218,290 0 
Net cash provided by financing activities524,935 617 
Net change in cash, cash equivalents and restricted cash372,457 (48,024)
Cash, cash equivalents and restricted cash, beginning of period250,632 173,016 
Cash, cash equivalents and restricted cash, end of period$623,089 $124,992 

See the accompanying notes to the unaudited Consolidated Financial Statements.
 Three Months Ended March 31,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(49,408)$(22,114)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation8,395 6,680 
Amortization of intangibles8,490 2,458 
Non-cash stock-based compensation12,103 2,653 
Non-cash operating lease expense2,653 1,862 
Amortization of convertible debt discount661 593 
Amortization of debt issue costs45 43 
Unrealized loss on investment in non-consolidated affiliate— 5,024 
Interest receivable on loan receivable from non-consolidated affiliate— (209)
Gain on sale of assets held for sale(2,048)— 
Write-off of COVID-19 PCR testing inventory and equipment— 6,061 
Other adjustments1,126 548 
Changes in assets and liabilities, net
Accounts receivable, net1,334 3,921 
Inventories(445)2,845 
Prepaid lease asset— (823)
Prepaid and other assets(2,044)(794)
Accounts payable, operating lease liabilities, deferred taxes, accrued and other liabilities(9,902)(6,538)
Net cash (used in) provided by operating activities(29,040)2,210 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities(16,167)(137,776)
Proceeds from sales and maturities of marketable securities36,438 13,919 
Purchases of property and equipment(8,219)(15,831)
Loan receivable from non-consolidated affiliate— (15,000)
Net cash provided by (used in) investing activities12,052 (154,688)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of equipment financing obligations(346)(1,091)
Issuance of common stock, net6,403 2,617 
Proceeds from issuance of convertible debt, net of issuance costs— 334,410 
Premiums paid for capped call confirmations— (29,291)
Proceeds from equity offering, net of issuance costs— 218,290 
Net cash provided by financing activities6,057 524,935 
Net change in cash, cash equivalents and restricted cash(10,931)372,457 
Cash, cash equivalents and restricted cash, beginning of period316,827 250,632 
Cash, cash equivalents and restricted cash, end of period$305,896 $623,089 

9

Three Months Ended March 31,Three Months Ended March 31,
2021202020222021
Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets:Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets:Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets:
Cash and cash equivalents Cash and cash equivalents$611,970 $86,254 Cash and cash equivalents$305,896 $611,970 
Restricted cash, non-current Restricted cash, non-current11,119 38,738 Restricted cash, non-current— 11,119 
Total cash, cash equivalents and restricted cashTotal cash, cash equivalents and restricted cash$623,089 $124,992 Total cash, cash equivalents and restricted cash$305,896 $623,089 
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:
Interest paidInterest paid$41 $1,136 Interest paid$442 $41 
Income taxes (refunded) paid, netIncome taxes (refunded) paid, net$(49)$2 Income taxes (refunded) paid, net$— $(49)
Supplemental disclosure of non-cash investing and financing information:Supplemental disclosure of non-cash investing and financing information:Supplemental disclosure of non-cash investing and financing information:
Property and equipment included in accounts payable$2,081 $1,844 
Increase in other current assets for the sale of assets held for saleIncrease in other current assets for the sale of assets held for sale$12,098 $— 
Purchases of property and equipment included in accounts payablePurchases of property and equipment included in accounts payable$1,061 $2,081 

See the accompanying notes to the unaudited Consolidated Financial Statements.
10
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1. Nature of the Business
Nature of the Business
NeoGenomics, Inc., a Nevada corporation (the “Company,” or “NeoGenomics”), and its subsidiaries, (the “Parent”, “Company”, or “NeoGenomics”), operatesoperate as a certified, high complexity clinical laboratory in accordance with the federal government’s CLIA, as amended, and is dedicated to the delivery of clinical diagnostic services to pathologists, oncologists, urologists, hospitals, and other laboratories as well as providing clinical trial services to pharmaceutical firms.
COVID-19 Pandemic Update
In December 2019, a novel strain of coronavirus (“COVID-19”) was identified and the disease has since spread across the world, including the United States (“U.S.”). In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The outbreak of the pandemic is materially adversely affecting the Company’s employees, patients, communities, and business operations, as well as the U.S. economy and financial markets. The impact from the COVID-19 pandemic, including recent COVID-19 variants, and the related disruptions had a significant adverse impact on the Company’s results of operations, volume growth rates and test volumes in 2020, 2021, and the first quarter of 2022. The full extent to which the COVID-19 outbreak will impact the Company’s business, results of operations, financial condition, and cash flows will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national, and international markets. As the COVID-19 pandemic continues, the Company’s results of operations, financial condition, and cash flows are likely tomay continue to be materially adversely affected, particularly if the pandemic continues to persist for a significant amount of time.
The Company anticipates that the cash on hand, marketable securities, and expected cash collections are sufficient to fund near-term capital and operating needs for at least the next 12 months.
At the end of the first quarter 2021, due to the broad roll-out of the COVID-19 vaccine and a sharp decline in COVID-19 polymerase chain reaction (“PCR”) testing demand, the Company made the decision to exit COVID-19 PCR testing and the Company recorded a $6.1 million expense related to the exit from COVID-19 PCR testing. This amount consisted of write-offs of $5.3 million for all remaining COVID-19 PCR testing inventory recorded to cost of revenue and $0.8 million for all remaining COVID-19 PCR testing laboratory equipment recorded to general and administrative expenses on the Consolidated Statements of Operations for the three months ended March 31, 2021. There were no such amounts recorded for the three months ended March 31, 2022.
Coronavirus Aid, Relief and Economic Security Act
The Federal government passed legislation andthat the President of the United States signed into law on March 27, 2020, known as the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). On April 10, 2020, the U.S. Department of Health & Human Services announced that Medicare-enrolled providers would receive a portion of a direct deposit disbursement totaling $50 billion. The $50 billion is part of a $100 billion Public Health and Social Service Emergency Fund created by the CARES Act. Payments made under the CARES Act are intended to reimburse healthcare providers for health care related expenses or lost revenues attributable to COVID-19 and are not required to be repaid provided that recipients attest to and comply with certain terms and conditions, including limitations on balance billing for COVID-19 patients. In the absence of specific guidance to account for government grants in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the Company accounts for such grants in accordance with international accounting standards for government grants. Such amounts are recognized when there is reasonable assurance that the Company will (1) comply with the conditions associated with the grant and (2) receive the grant.
The CARES Act permits the deferral of payment of the employer portion of social security taxes between March 27, 2020 and December 31, 2020, with 50%2020. Fifty percent of the deferred amount was due on December 31, 2021 and the remaining 50% is due on December 31, 2022. As of March 31, 20212022 and December 31, 20202021 the total accrued deferred social security taxes related to the CARES Act was $5.9$3.0 million. At both March 31, 2021 and December 31, 2020 thisThis amount was recorded evenly betweenin accrued expenses and other liabilities and other long-term liabilities on the Consolidated Balance Sheets.
Additionally, the CARES Act included an Employee Retention Tax Credit (“ERTC”) provision designed to encourage employers to keep employees on their payroll. The ERTC is a refundable tax credit against certain payroll taxes paid by employers for eligible wages paid between March 13, 2020 and December 31, 2020 that meet the requirements of the ERTC provision. On March 11, 2021, the American Rescue Plan Act was enacted extending the deadline of the ERTC to December 31, 2021 and expanded who is eligible to claim the credit. For the three months ended March 31, 2021, the Company recognized $0.4 million under the ERTC which was included in loss from operations on the Consolidated Statements of Operations. There were no such amounts recorded for the three months ended March 31, 2020.
11
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim Consolidated Financial Statements are unaudited and have been prepared in accordance with GAAP for interim financial information. All intercompany transactions and balances have been eliminated in the accompanying Consolidated Financial Statements.
The accounting policies of the Company are the same as those set forth in Note 2. Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements contained in the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 2020,2021, except for Stock-Based Compensation, Income Taxes and the impact of the adoption of new accounting standards discussed under Recently AdoptedRecent Accounting Guidance.Pronouncements.
Unaudited Interim Financial Information
Certain information and footnote disclosures normally included in the Company’s annual audited Consolidated Financial Statements and accompanying notes have been condensed or omitted in these accompanying interim consolidated financial statementsConsolidated Financial Statements and footnotes. Accordingly, the accompanying interim unaudited Consolidated Financial Statements included herein should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes included in the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 2020.2021.
11
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The results of operations presented in this quarterly reportQuarterly Report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments and accruals, consisting only of normal, recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein.
Use of Estimates
The Company prepares its Consolidated Financial Statements in conformity with GAAP. These principles require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the Consolidated Financial Statements. Actual results and outcomes may differ from management’s estimates, judgments and assumptions. Significant estimates, judgments and assumptions used in these Consolidated Financial Statements include, but are not limited, to those related to revenues, accounts receivable and related allowances, contingencies, useful lives and recovery of long-term assets and intangible assets, income taxes and valuation allowances, stock-based compensation, business combinations, and impairment analysis of goodwill. These estimates, judgments, and assumptions are reviewed periodically and the effects of material revisions in estimates are reflected on the Consolidated Financial Statements prospectively from the date of the change in estimate.
Stock-Based CompensationAssets Held for Sale
Assets to be disposed of by sale are reclassified as held for sale if their carrying amounts are expected to be recovered through a sale transaction rather than through continuing use and when the Company commits to a plan to sell the assets. Assets classified as held for sale are measured at the lower of their carrying value or fair value less selling costs. Such assets are classified within current assets if there is reasonable certainty that the sale and collection of consideration will take place within one year. Upon reclassification as held for sale, long-lived assets are no longer depreciated or amortized and a measurement for impairment is performed to determine if there is an excess of carrying value over fair value less costs to sell. Any remeasurement is reported as an adjustment to the carrying value of the assets. Subsequent changes to estimated fair value less the selling costs will impact the measurement of assets held for sale if the fair value is determined to be less than the carrying value of the assets.
The Company measures compensation expense for stock-based awards to employees, non-employee contracted physicians, and directors based uponowned 43,560 square feet of its Carlsbad, California facility. During the awards’ initial grant-date fair value. The estimated grant-date fair valuethird quarter of the award is recognized as expense over the requisite service period using the straight-line method.
Prior to 2021, the Company estimatedcommitted to selling this property and the associated land and concluded that these assets met the held for sale criteria. As of December 31, 2021, $10.1 million was recorded as assets held for sale within current assets on the Consolidated Balance Sheets for this property and associated land and reflected its carrying value which was lower than its fair value less costs to sell. The Company sold this property and associated land for proceeds of stock options using$12.1 million, net of closing costs, on March 31, 2022 and recorded a trinomial lattice model. On January 1,receivable for this amount in other current assets on the Consolidated Balance Sheets at March 31, 2022. The Company recognized a net gain on the sale of this property and associated land of $2.0 million in general and administrative expenses on the Consolidated Statements of Operations.
Sales and Marketing Expenses
Sales and marketing expenses are primarily attributable to employee-related costs including sales management, sales representatives, sales and marketing consultants, and marketing and customer service personnel in the Clinical Services segment. Advertising costs are expensed at the time they are incurred and are deemed immaterial for the three months ended March 31, 2022 and 2021.
Recent Accounting Pronouncements
In November 2021, the Company began applyingFASB issued ASU No. 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance (“ASU 2021-10”). This update requires business entities to disclose information annually about certain government assistance they receive. Such annual disclosure requirements include the Black-Scholes option valuation model (“Black-Scholes”)nature of the transactions and the related accounting policy used, the line items on a prospective basisthe balance sheet and income statement that are affected and the amounts applicable to new awards. The Company expectseach financial statement line item and significant terms and conditions of the usetransactions. ASU 2021-10 is effective for annual periods beginning after December 15, 2021, with early adoption permitted. ASU 2021-10 should be applied either (1) prospectively to all transactions within the scope of Black-Scholes to provide a more ubiquitous estimate of fair value. Like the prior trinomial lattice model, Black-Scholes is affected by the stock price onamendments that are reflected in financial statements at the date of the grant as well as assumptions regarding a number of highly complexinitial application and subjective variables. These variables includenew transactions that are entered into after the expected term of the option, expected risk-free interest rate, the expected volatility of common stock, and expected dividend yield, each of which is more fully described below. The assumptions for expected term and expected volatility are the two assumptions that significantly affect the grant date fair value.
Expected Term: The expected term of an option is the period of time that the option is expected to be outstanding. The average expected term is determined using the Black-Scholes model.
Risk-free Interest Rate: The risk-free interest rate used in the Black-Scholes model is based on the implied yield at the grant date of the U.S. Treasury zero-coupon issue with an equivalent terminitial application or (2) retrospectively to the stock-based award being valued. Where the expected term of a stock-based award does not correspond with the term for which a zero coupon interest rate is quoted, the Company uses the nearest interest rate from the available maturities.
Expected Stock Price Volatility:those transactions. The Company useswill adopt this new accounting standard in its own historical weekly volatility because that is more reflective of market conditions.
Dividend Yield: BecauseAnnual Report on Form 10-K for the Company has never paid a dividendyear ended December 31, 2022 and does not expect the adoption of this standard to begin doing sohave a material impact on its Consolidated Financial Statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). This update amends guidance to require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606). At the foreseeable future,acquisition date, an acquirer should account for the Company assumed no dividend yieldrelated revenue contracts in valuingaccordance with Topic 606 as if it had originated the stock-based awards.contracts. ASU 2021-08 is effective for fiscal years beginning
12
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Income Taxes
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 and lives for property and equipment, recognition of accounts receivable, compensation related expenses, and various other expenses that have been allowed for or accrued for financial statement purposes but are not currently deductible for income tax purposes.
The provision for income taxes,after December 15, 2022, including the effective tax rate and analysis of potential tax exposure items, if any, requires significant judgment and expertise in federal and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and any estimated valuation allowances deemed necessary to recognize deferred tax assets at an amount that is more likely than not to be realized.
Management assesses the recoverability of its deferred tax assets asinterim periods within those fiscal years. Early adoption of the end of each quarter, weighing available positive and negative evidence, andamendments is permitted including adoption in an interim period. If the Company early adopts in an interim period, the Company is required to establish and maintain a valuation allowanceapply the amendments (1) retrospectively to all business combinations for these assets if it is more likely than not that somewhich the acquisition date occurs on or allafter the beginning of the deferred income tax assets will notfiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The amendments in ASU 2021-08 should be realized. The weight givenapplied prospectively to business combinations occurring on or after the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to support a conclusion that a valuation allowance is not needed.
As of December 31, 2020, expected future reversalseffective date of the Company’s deferred income tax liabilities provided objectively verifiable positive evidence to support the recoverability of its deferred tax assets. However, on January 1, 2021, the Company adopted ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting For Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) using the modified retrospective approach, which resulted in a decrease of approximately $6.6 million in the Company’s deferred income tax liabilities. In addition, approximately $2 million of valuation allowance against the Company’s deferred income tax assets was established upon adoption of ASU 2020-06, resulting from the decrease in deferred income tax liabilities available to support the recoverability of deferred tax assets. The valuation allowance represents the portion of the Company’s U.S. deferred income tax assets that are not more likely than not to be realized in future periods, primarily related to Federal and California research and development tax credit carryforwards.
A cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome. Cumulative loss in recent years is commonly defined as a three-year cumulative loss position. As of March 31, 2021, the Company’s U.S. operations were in a three-year cumulative loss position. Management determined that sufficient objectively verifiable positive evidence did not exist to overcome the negative evidence of the Company’s U.S. cumulative loss position. Accordingly, the Company’s estimated annual effective tax rate applied to the Company’s pre-tax loss for the three months ended March 31, 2021 included the unfavorable impact of valuation allowance expected to be established against the Company’s deferred income tax assets expected to be created in 2021 for additional the U.S. net operating loss and tax credit carryforwards.
As of March 31, 2021, the Company’s total valuation allowance against U.S. deferred income tax assets was approximately $9.3 million.amendments. The Company also continued to maintain a full valuation allowance against deferred tax assets in Switzerland, Singapore and China, which increased from $2.6 million asis currently evaluating its adoption date of December 31, 2020 to $3 million as of March 31, 2021.
The Company evaluates tax positions that have been taken or are expected to be taken in its tax returns, and records a liability for uncertain tax positions, if deemed necessary. The Company follows a two-step approach to recognizing and measuring uncertain tax positions. First, tax positions are recognized if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any. Second, the tax position is measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement.
The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes in the accompanying Consolidated Balance Sheets. At March 31, 2021 and December 31, 2020 the Company had an uncertain tax position related to Federal and State R&D tax credit carryforwards, including a provision for interest and penalties related to such position. No interest and penalties have been accrued, as the income tax credits are carried forward to offset income tax liabilities in future years.
Recently Adopted Accounting Guidance
In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, which updates various codification topics by clarifying disclosure requirements to align with the SEC’'s regulations. The Company adopted this pronouncement on January 1, 2021standard and the impact of the provisions of this standard on its Consolidated Financial Statements was immaterial.
13
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting For Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 simplifies the accounting for convertible instruments by removing the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such convertible debt instruments. Similarly, the debt discount, that is equal to the carrying value of the embedded conversion feature upon issuance, will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible instrument was issued at a substantial premium. In addition, ASU 2020-06 requires the application of the if-converted method for calculating the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. ASU 2020-06 can be adopted on either a fully retrospective or modified retrospective basis.
The Company adopted ASU 2020-06 on January 1, 2021 using the modified retrospective approach, and accordingly the Company recorded an adjustment that reflects the 1.25% Convertible Senior Notes due 2025 as if the embedded conversion feature had not been separated. The impact upon adoption on the Consolidated Balance Sheets included an increase of approximately $27.2 million in convertible senior notes, net, a write-off of approximately $6.6 million in deferred income tax liabilities, establishment of approximately $2 million of valuation allowance against deferred income tax assets, and a decrease of approximately $23.3 million in additional paid-in capital. In addition, upon adoption, there was an adjustment to increase the beginning balance of retained earnings on the Consolidated Balance Sheets for previously recognized interest expense, net of tax effects, of approximately $2.7 million for amortization of debt discount related to the carrying value of the embedded conversion feature upon issuance, as well as a decrease to the beginning balance of retained earnings of approximately $2 million for the establishment of valuation allowance against the Company's deferred income tax assets. There was no impact to the Company’s earnings per share calculation. See Note 7. Debt for further information regarding the 1.25% Convertible Senior Notes due 2025.
In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (“Topic 321”), Investments-Equity Method and Joint Ventures (“Topic 323”) and Derivatives and Hedging (“Topic 815”) (collectively, “ASU 2020-01”). ASU 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for the equity method investments in Topic 323 and the accounting for certain forward contracts and purchased options in Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020 on a prospective basis and early adoption was permitted. The Company adopted ASU 2020-01 on January 1, 2021 and there was no impact from the provisions of this standard on its Consolidated Financial Statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“Topic 740”), which simplifies the accounting for income taxes, eliminates certain exceptions within Topic 740 and clarifies certain other aspects of the current guidance to promote consistency among reporting entities. The new standard is effective for fiscal years beginning after December 15, 2020 on a prospective basis and early adoption is permitted. The Company adopted this pronouncement on January 1, 2021 and the impact of the provisions of this standard on its Consolidated Financial Statements was immaterial.
Accounting Pronouncements Pending Adoption
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) which provides for temporary optional expedients and exceptions to the current guidance on certain contract modifications and hedging relationships to ease the burdens related to the expected market transition from the London Inter-bank Offered Rate (“LIBOR”) or other reference rates to alternative reference rates. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”) to clarify that certain optional expedients and exceptions apply to modifications of derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements, and for calculating price alignment interest. ASU 2020-04 iswas effective beginning on March 12, 2020 and may be applied prospectively to such transactions through December 31, 2022 and ASU 2021-01 iswas effective beginning on January 7, 2021 and may be applied retrospectively or prospectively to such transactions through December 31, 2022. The Company will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. As of March 31, 2021,2022, there was no impact to the Company’s Consolidated Financial Statements related to ASU 2020-04 or ASU 2021-01.

Note 3. Acquisitions
Trapelo Health
On April 7, 2021 (the “Trapelo Acquisition Date”), the Company completed the acquisition of a 100% ownership interest in Intervention Insights, Inc. d/b/a Trapelo Health (“Trapelo”), an information technology company focused on precision oncology. The purchase price consisted of (i) cash consideration of $35.6 million, which included a net adjustment of $0.6 million for estimated cash on hand of Trapelo and estimated working capital adjustments on the Trapelo Acquisition Date, and (ii) equity consideration of $29.2 million, consisting of 597,712 shares of the Company’s common stock, par value $0.001 per share, valued at $48.81 per share. The Company acquired control of Trapelo on the Trapelo Acquisition Date; therefore, the fair value of the common stock issued as part of consideration was determined on the basis of the closing market price of the Company’s common stock immediately prior to the Trapelo Acquisition Date. The Trapelo acquisition enhances the Company’s ability to provide customers clinical decision support to help answer complex questions related to precision oncology biomarker testing and treatment options as part of the Company’s comprehensive oncology offerings.
The acquisition of Trapelo was determined to be a business combination and has been accounted for using the acquisition method. The purchase price and purchase price allocation were based upon management’s best estimates and assumptions and are considered final as of March 31, 2022. The following table summarizes the purchase consideration recorded for the acquisition of Trapelo, the fair value of the net assets acquired and liabilities assumed, and the calculation of goodwill based on the excess of the consideration transferred over the fair value of the net assets acquired and liabilities assumed at the Trapelo Acquisition Date (in thousands, except per share data):
14
13
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Amount
Purchase consideration:
Shares of common stock issued as consideration597,712 
Per share value of common stock issued as consideration$48.81 
Fair value of common stock at Trapelo Acquisition Date$29,174 
Plus: Cash paid at closing35,591 
Total purchase consideration$64,765 
Allocation of the purchase consideration:
Cash$713 
Other current assets282 
Identifiable intangible asset - marketing assets549 
Identifiable intangible asset - developed technology19,040 
Other long-term assets268 
Total identifiable assets acquired20,852 
Current liabilities(751)
Net identifiable assets acquired20,101 
Goodwill44,664 
Total purchase consideration$64,765 
The identified developed technology and marketing intangible assets are being amortized over ten years and four years, respectively, based on their estimated useful lives. The weighted-average amortization period in total for all classes of intangible assets from the Trapelo acquisition is 9.8 years. The developed technology was valued using the income approach, specifically, the multi-period excess earnings method, which measures the after-tax cash flows attributable to the developed technology. The marketing intangible assets were valued using the income approach, specifically, the relief from royalty method, which measures the cash flow streams attributable to the marketing intangible assets in the form of the avoided royalty payment that would be paid to the owner in return for the rights to use the marketing intangible assets had the intangible assets not been acquired. The values of the identifiable intangible assets represent Level 3 measurements as they were based on unobservable inputs reflecting the Company’s assumptions used in pricing the assets at fair value. These inputs required significant judgments and estimates at the time of the valuation.
The goodwill recognized, all of which was assigned to the Clinical Services segment, was primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of the healthcare and information technology industries. None of the goodwill resulting from the acquisition of Trapelo is expected to be deductible for income tax purposes.
The results of operations of Trapelo are included in the Company’s unaudited Consolidated Financial Statements beginning on the Trapelo Acquisition Date. No pro forma information has been included relating to the Trapelo acquisition, as this acquisition was not deemed to be material to the Company’s revenue or net loss on a pro forma basis.
Inivata Limited
On June 18, 2021 (the “Inivata Acquisition Date”), the Company completed the acquisition of the remaining equity interests in Inivata Limited, a private limited company incorporated in England and Wales (“Inivata”). Inivata is a global, commercial stage, liquid biopsy platform company. The acquisition follows a $25.0 million minority equity investment by the Company in Series C1 Preference Shares (the “Preference Shares” or “previously-held equity interest”) in Inivata in May 2020, at which time the Company also acquired a fixed price option to purchase the remainder of equity interests in Inivata for $390.0 million (the “Purchase Option”). The Company and Inivata also entered into a line of credit agreement in the amount of $15.0 million (the “Line of Credit”) in May 2020. In the first quarter of 2021, prior to the Inivata Acquisition Date, an observable transaction of an identical investment in Inivata Preference Shares occurred which resulted in a remeasurement of the Preference Shares to the value of this observable transaction. The Company recorded a net unrealized loss of $5.0 million on investment in non-consolidated affiliate for this remeasurement for the three months ended March 31, 2021 in other expense (income), net on the Consolidated Statements of Operations.
The Inivata acquisition adds liquid biopsy platform technology, including minimal residual disease testing capabilities, to the Company’s comprehensive portfolio of oncology testing solutions. The purchase price consisted of cash consideration of
14
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
$398.6 million, which included a net adjustment of $8.6 million for estimated cash on hand of Inivata and other adjustments on the Inivata Acquisition Date, and was funded through cash on hand and a private placement of equity.
Prior to the acquisition of the remaining equity interests in Inivata, the Company accounted for its previously-held equity interest and the Purchase Option in Inivata as equity securities without a readily determinable fair value. The equity interests were recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Therefore, the Company’s acquisition of control of Inivata on the Inivata Acquisition Date was accounted for as a business combination achieved in stages under the acquisition method. Accordingly, the Company used a discounted cash flow to derive a business enterprise value of Inivata in order to determine the acquisition-date fair value of the Company’s previously-held equity interest and Purchase Option in Inivata. To determine the fair value of the previously-held equity interest, the fair value of Inivata’s total equity was allocated to its various classes of equity based on the respective rights and privileges of each class of stock in liquidation. The business enterprise value and a Black-Scholes model were then used to determine the fair value of the remaining equity acquired through the exercise of the Purchase Option. The Purchase Option was recorded at the fair value at the Inivata Acquisition Date based on its settlement value. This resulted in fair values of $64.9 million in Preference Shares and a $74.3 million Purchase Option, immediately prior to the acquisition. On the Inivata Acquisition Date, the $10.3 million outstanding under the Line of Credit extended by the Company to Inivata was effectively settled as part of the acquisition of Inivata at the $15.0 million principal amount and was recorded as part of the consideration transferred in the acquisition. The Company recorded a gain on investment in and loan receivable from non-consolidated affiliate, net, within the Company’s Consolidated Statements of Operations of $109.3 million for the year ended December 31, 2021 for the excess of the acquisition-date fair value of the Company’s previously-held equity interest, Purchase Option, and Line of Credit over their carrying values.
The fair value and allocation of the business combination are preliminary, are based upon management’s best estimates and assumptions, and are subject to future revision. The following table summarizes the preliminary calculation of goodwill based on the excess of the estimated fair value of the consideration transferred including the fair value of the Line of Credit, and the estimated fair value of the previously-held equity interest and Purchase Option, over the estimated fair value of the net assets acquired and liabilities assumed at the Inivata Acquisition Date and includes measurement period adjustments recorded during 2021 (in thousands):
15
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
June 18, 2021
(as initially reported)		Measurement Period AdjustmentsJune 18, 2021
(as adjusted)
Fair value of business combination:
Cash paid at closing$398,594 $— $398,594 
Fair value of Line of Credit15,000 — 15,000 
Fair value of consideration transferred$413,594 $— $413,594 
Fair value of previously-held equity interest(1)
62,919 1,987 64,906 
Fair value of Purchase Option(1)
58,537 15,763 74,300 
Total fair value of business combination$535,050 $17,750 $552,800 
Allocation of the fair value business combination:
Cash$14,068 $— $14,068 
Other current assets(2)
5,366 345 5,711 
Property and equipment1,753 — 1,753 
Identifiable intangible assets - developed technology(1)
302,982 (11,796)291,186 
Identifiable intangible assets - trademarks(1)
31,700 (226)31,474 
Identifiable intangible asset - trade name(1)
2,322 253 2,575 
Other long-term assets6,240 — 6,240 
Total identifiable assets acquired364,431 (11,424)353,007 
Current liabilities(4,241)(1,650)(5,891)
Deferred income tax liabilities(3)
(64,680)3,686 (60,994)
Other long-term liabilities(4,690)— (4,690)
Net identifiable assets acquired290,820 (9,388)281,432 
Goodwill244,230 27,138 271,368 
Total fair value of business combination$535,050 $17,750 $552,800 

(1) Measurement period adjustment primarily relates to a change in estimated taxes based on jurisdictions in which forecasted profits are expected to be generated.
(2) Measurement period adjustment relates to the recognition of a credit which Inivata is entitled to claim for certain research and development expenditures
(3) Measurement period adjustment relates to a change in estimated deferred income tax liabilities as a result of the reduction in the amounts for intangibles assets and related future amortization.
Due to the timing of the acquisition, the following are considered preliminary and are subject to change:
•amounts for intangible assets, property and equipment, other current assets, current liabilities, and other long-term liabilities pending finalization of the valuation;
•amounts for income tax liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction;
•amount of goodwill pending the completion of the valuation of the assets acquired and liabilities assumed and the reporting unit allocation of the goodwill; and
•the acquisition-date fair value of the Company’s previously-held equity interest, Purchase Option, and the Line of Credit, and the gain on investment in and loan receivable from non-consolidated affiliate.
The Company will finalize these amounts no later than one year from the acquisition date, once it obtains the information necessary to complete the measurement process. Any changes resulting from facts and circumstances that existed as of the acquisition date may result in adjustments to the preliminary amounts disclosed above which may impact the reported results in the period those adjustments are identified.
The identified developed technology intangible assets and the trademark intangible assets are both being amortized over fifteen years, and the trade name intangible asset is being amortized over five years, based on their estimated useful lives. The
16
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
weighted-average amortization period in total for all classes of intangible assets from the Inivata acquisition is 14.9 years. The developed technology was valued using the income approach, specifically, the multi-period excess earnings method, which measures the after-tax cash flows attributable to the developed technology. The trademarks and trade name assets were valued using the income approach, specifically, the relief from royalty method, which measures the cash flow streams attributable to the trademarks and trade name assets in the form of the avoided royalty payment that would be paid to the owner in return for the rights to use the trademarks and trade name assets had the assets not been acquired. The values of the identifiable intangible assets represent Level 3 measurements as they were based on unobservable inputs reflecting the Company’s assumptions used in pricing the assets at fair value. These inputs required significant judgments and estimates at the time of the valuation.
The goodwill recognized, of which $238.4 million and $33.0 million was assigned to the Clinical Services and Pharma Services segments, respectively, was primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of liquid biopsy technology for oncology testing. The recording of amortizable intangibles has given rise to a deferred tax liability upon the acquisition of Inivata which increased goodwill by $61.0 million. None of the goodwill resulting from the acquisition of Inivata is expected to be deductible for income tax purposes.
The following unaudited pro forma information and has been provided for illustrative purposes only and is not necessarily indicative of results that would have occurred had the acquisition of Inivata occurred on January 1, 2020, nor are they necessarily indicative of future results (in thousands):

Three Months Ended March 31, 2021
(unaudited)
Net revenue$115,452 
Net loss$(27,895)

These unaudited pro forma results represent the combined results of operations of the Company and Inivata, on an unaudited pro forma basis, for the period in which the acquisition of Inivata occurred and the prior reporting period as though the companies had been combined as of the beginning of the earliest period presented. Therefore, the unaudited pro forma consolidated results have been prepared by adjusting the Company’s historical results to include the acquisition of Inivata as if it occurred on January 1, 2020. These unaudited pro forma consolidated historical results exclude $5.0 million of unrealized loss on investment in non-consolidated affiliate recorded in other expense (income), net on the Consolidated Statements of Operations for the three months ended March 31, 2021.
Note 3.4. Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy has been established based on three levels of inputs, of which the first two are considered observable and the last unobservable.
Level 1: Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
Level 2: Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.
Level 3: Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
The Company measures certain financial assets at fair value on a recurring basis, including its marketable securities and certain cash equivalents. The Company considers all securities available-for-sale, including those with maturity dates beyond 12 months, and therefore these securities are classified within current assets on the consolidated balance sheetsConsolidated Balance Sheets as they are available to support current operational liquidity needs. The money market accounts are valued based on quoted market prices in active markets. The marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third-party pricing entities, except for U.S. Treasury securities which are valued based on quoted market prices in active markets.
17
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following tables set forth the amortized cost, gross unrealized gains, gross unrealized losses and fair values of the Company’s marketable securities accounted for as available-for-sale securities as of March 31, 20212022 and December 31, 2020.2021.

March 31, 2022
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Financial Assets:
Short-term marketable securities:
     U.S. Treasury securities$51,190 $— $(610)$50,580 
     Yankee bonds8,031 — (76)7,955 
     Agency bonds7,020 — (49)6,971 
     Municipal bonds12,403 — (711)11,692 
     Commercial paper9,185 — — 9,185 
     Asset-backed securities28,364 — (311)28,053 
     Corporate bonds62,615 1 (1,518)61,098 
Total$178,808 $1 $(3,275)$175,534 
March 31, 2021
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Financial Assets:
Short-term marketable securities:
     U.S. Treasury securities$51,745 $1 $(43)$51,703 
     Commercial paper22,187 0 0 22,187 
     Asset-backed securities21,612 0 (15)21,597 
     Corporate bonds95,371 0 (148)95,223 
Total$190,915 $1 $(206)$190,710 

December 31, 2020
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Financial Assets:
Short-term marketable securities:
     U.S. Treasury securities$21,357 $1 $(18)$21,340 
     Commercial paper14,543 0 0 14,543 
     Asset-backed securities14,546 0 (8)14,538 
     Corporate bonds17,144 0 (19)17,125 
Total$67,590 $1 $(45)$67,546 



15
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


December 31, 2021
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Financial Assets:
Short-term marketable securities:
     U.S. Treasury securities$52,791 $11 $(138)$52,664 
     Yankee bonds6,175 1 (16)6,160 
     Agency bonds17,546 — (16)17,530 
     Municipal bonds12,440 — (211)12,229 
     Commercial paper17,694 — (4)17,690 
     Asset-backed securities27,620 1 (86)27,535 
     Corporate bonds65,198 9 (452)64,755 
Total$199,464 $22 $(923)$198,563 

The Company had $0.5$0.4 million and $0.2$0.6 million of accrued interest receivable at March 31, 20212022 and December 31, 2020,2021, respectively, included in other current assets on its Consolidated Balance Sheets related to its marketable securities. There were no realized gains or losses on marketable securities for the three months ended March 31, 2022. Realized gains or losses on marketable securities for the three months ended March 31, 2021 were immaterial. There were 0 realized gains or losses on marketable securities for the three months ended March 31, 2020.
18
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following tables set forth the fair value of available-for-sale marketable securities by contractual maturity at March 31, 20212022 and December 31, 2020.2021.
March 31, 2022
(in thousands)One Year or LessOver One Year Through Five YearsOver Five YearsTotal
Financial Assets:
Marketable Securities:
     U.S. Treasury securities$38,899 $11,681 $— $50,580 
     Yankee bonds6,103 1,852 — 7,955 
     Agency bonds6,971 — — 6,971 
     Municipal bonds— 11,692 — 11,692 
     Commercial paper9,185 — — 9,185 
     Asset-backed securities23,250 4,803 — 28,053 
     Corporate bonds23,984 37,114 — 61,098 
Total$108,392 $67,142 $— $175,534 
March 31, 2021
(in thousands)One Year or LessOver One Year Through Five YearsOver Five YearsTotal
Financial Assets:
Marketable Securities:
     U.S. Treasury securities$9,113 $42,590 $0 $51,703 
     Commercial paper22,187 0 0 22,187 
     Asset-backed securities451 21,146 0 21,597 
     Corporate bonds23,282 71,941 0 95,223 
Total$55,033 $135,677 $0 $190,710 

December 31, 2020December 31, 2021
(in thousands)(in thousands)One Year or LessOver One Year Through Five YearsOver Five YearsTotal(in thousands)One Year or LessOver One Year Through Five YearsOver Five YearsTotal
Financial Assets:Financial Assets:Financial Assets:
Marketable Securities:Marketable Securities:Marketable Securities:
U.S. Treasury securities U.S. Treasury securities$6,075 $15,265 $0 $21,340  U.S. Treasury securities$22,550 $30,114 $— $52,664 
Yankee bonds Yankee bonds4,150 2,010 — 6,160 
Agency bonds Agency bonds14,041 3,489 — 17,530 
Municipal bonds Municipal bonds— 12,229 — 12,229 
Commercial paper Commercial paper14,543 0 0 14,543  Commercial paper17,690 — — 17,690 
Asset-backed securities Asset-backed securities560 13,978 0 14,538  Asset-backed securities20,868 6,667 — 27,535 
Corporate bonds Corporate bonds5,863 11,262 0 17,125  Corporate bonds25,412 39,343 — 64,755 
TotalTotal$27,041 $40,505 $0 $67,546 Total$104,711 $93,852 $— $198,563 

The following tables set forth the Company’s cash equivalents and marketable securities accounted for as available-for-sale securities that were measured at fair value on a recurring basis based on the fair value hierarchy as of March 31, 20212022 and December 31, 2020.
March 31, 2021
(in thousands)Level 1Level 2Level 3Total
Financial Assets:
  Cash equivalents:
     Money market funds$570,782 $0 $0 $570,782 
     Commercial paper0 17,795 0 17,795 
Marketable securities:
     U.S. Treasury securities51,703 0 0 51,703 
     Commercial paper0 22,187 0 22,187 
     Asset-backed securities0 21,597 0 21,597 
     Corporate bonds0 95,223 0 95,223 
Total$622,485 $156,802 $0 $779,287 

2021.
1619
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

December 31, 2020March 31, 2022
(in thousands)(in thousands)Level 1Level 2Level 3Total(in thousands)Level 1Level 2Level 3Total
Financial Assets:Financial Assets:Financial Assets:
Cash equivalents: Cash equivalents: Cash equivalents:
Money market funds Money market funds$209,141 $0 $0 $209,141  Money market funds$246,906 $— $— $246,906 
U.S. Treasury securities1,000 0 0 1,000 
Commercial paper Commercial paper0 3,999 0 3,999  Commercial paper— 27,664 — 27,664 
Marketable securities:Marketable securities:Marketable securities:
U.S. Treasury securities U.S. Treasury securities21,340 0 0 21,340  U.S. Treasury securities50,580 — — 50,580 
Yankee bonds Yankee bonds7,955 — — 7,955 
Agency bonds Agency bonds6,971 — — 6,971 
Municipal bonds Municipal bonds11,692 — — 11,692 
Commercial paper Commercial paper0 14,543 0 14,543  Commercial paper— 9,185 — 9,185 
Asset-backed securities Asset-backed securities0 14,538 0 14,538  Asset-backed securities— 28,053 — 28,053 
Corporate bonds Corporate bonds0 — 17,125 0 17,125  Corporate bonds— 61,098 — 61,098 
TotalTotal$231,481 $50,205 $0 $281,686 Total$324,104 $126,000 $— $450,104 
December 31, 2021
(in thousands)Level 1Level 2Level 3Total
Financial Assets:
  Cash equivalents:
     Money market funds$254,157 $— $— $254,157 
     Commercial paper— 22,491 — 22,491 
Marketable securities:
     U.S. Treasury securities52,664 — — 52,664 
     Yankee bonds6,160 — — 6,160 
     Agency bonds17,530 — — 17,530 
     Municipal bonds12,229 — — 12,229 
     Commercial paper— 17,690 — 17,690 
     Asset-backed securities— 27,535 — 27,535 
     Corporate bonds— 64,755 — 64,755 
Total$342,740 $132,471 $— $475,211 

There were no transfers of financial assets or liabilities into or out of Level 1, Level 2, or Level 3 for the three months ended March 31, 20212022 and March 31, 2020.2021.
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
The carrying value of cash and cash equivalents, accounts receivable, net, accounts payable, accrued expenses and other liabilities, and other current assets and liabilities, are considered reasonable estimates of their respective fair values at March 31, 20212022 and December 31, 20202021 due to their short-term nature.
The Company also measures certain non-financial assets at fair value on a nonrecurring basis, primarily intangible assets, goodwill, and long-lived assets in connection with periodic evaluations for potential impairment. The Company estimates the fair value of these assets using primarily unobservable inputs and, as such, these are considered Level 3 fair value measurements.
17
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 4. Leases
As of March 31, 2021, the maturities of our operating lease liabilities and a reconciliation to the present value of lease liabilities were as follows (in thousands):

Remaining Lease Payments
Remainder of 2021$5,480 
20227,150 
20237,071 
20247,179 
20254,381 
Thereafter34,230 
Total remaining lease payments65,491 
Less: imputed interest(13,943)
Total operating lease liabilities51,548 
Less: current portion(5,111)
Long-term operating lease liabilities$46,437 
Weighted-average remaining lease term (in years)10.95
Weighted-average discount rate4.2 %
The following summarizes additional supplemental data related to operating leases (in thousands):

Three Months Ended March 31,
20212020
Operating lease costs$2,305 $2,105 

Three Months Ended March 31,
20212020
Right-of-use assets obtained in exchange for operating lease liabilities$6,580 $24,071 
Cash paid for operating leases$2,678 $1,553 

Lease contracts that have been executed but have not yet commenced are excluded from the tables above. As of March 31, 2021 the Company has entered into $33.8 million of contractually binding minimum lease payments for leases executed but not yet commenced. This amount primarily relates to the lease of the laboratory and headquarters facility in Fort Myers, Florida that is expected to commence in 2021. In addition to the minimum lease payments, the Company will pay approximately $25 million relating to the construction of the underlying assets and approximately $17 million in leasehold improvements. These amounts were placed into separate construction disbursement escrow accounts and as of March 31, 2021, $11.1 million was unpaid and remaining in restricted cash on the Consolidated Balance Sheets. Disbursements to the landlord take place from time to time to pay for the costs of the landlord’s work. The disbursements are classified as a prepaid lease asset or leasehold improvements, as appropriate, until the lease commences. Upon lease commencement, the prepaid lease asset will be included in the calculation of the right-of-use asset and the leasehold improvements will be placed in service. Construction of the infrastructure of this facility commenced in the first quarter of 2020. The Company is not expected to control the underlying assets during the construction period and therefore is not considered the owner of the underlying assets for accounting purposes.
Note 5. Goodwill and Intangible Assets
Goodwill as of March 31, 2021 and December 31, 2020 was $211.1 million. There was no changeThe following table summarizes the changes in the carrying amount of goodwill duringby segment for the three months ended March 31, 2021.
Intangible assets consisted of the following as of2022 (in thousands):
18
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

  March 31, 2021
 Amortization
Period		CostAccumulated
Amortization		Net
Customer Relationships84-180 months$143,101 $38,353 $104,748 
Trade Name - Indefinite lived— 13,447 — 13,447 
Total $156,548 $38,353 $118,195 
  December 31, 2020
 Amortization
Period		CostAccumulated
Amortization		Net
Customer Relationships84 - 180 months$143,101 $35,895 $107,206 
Trade Name - Indefinite lived— 13,447 — 13,447 
Total$156,548 $35,895 $120,653 
The Company recorded approximately $2.5 million straight-line amortization expense of intangible assets for each of the three months ended March 31, 2021 and 2020. The Company records amortization expense within general and administrative expense on the Consolidated Statement of Operations.
The estimated amortization expense related to amortizable intangible assets for each of the four succeeding fiscal years and thereafter as of March 31, 2021 is as follows (in thousands):
Remainder of 2021$7,373 
20229,832 
20239,832 
20249,832 
20259,832 
Thereafter58,047 
Total$104,748 
19
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 6. Investment in Non-Consolidated Affiliate
On May 22, 2020, the Company formed a strategic alliance with Inivata Limited, a company incorporated in England and Wales (“Inivata”), and entered into a Strategic Alliance Agreement and Laboratory Services Agreement with Inivata's laboratory subsidiary in the U.S., Inivata, Inc., whereas Inivata’s laboratory will render and perform certain laboratory testing which the Company will make available to customers. The terms and conditions of the Laboratory Services Agreement are consistent with those that would be negotiated between willing parties on an arm’s length basis. See Note 12. Related Party Transactions, for additional details on amounts paid related to the Laboratory Services Agreement.
In addition to the Laboratory Services Agreement, the Company also entered into an Investment Agreement with Inivata (the “Investment Agreement”), pursuant to which the Company acquired Series C1 Preference Shares (the “Preference Shares”) for $25 million in cash (the “Investment”) resulting in a minority interest in Inivata’s outstanding equity and an Option Deed which provides the Company with an option to purchase Inivata (the “Purchase Option”). The Investment Agreement also granted the Company one seat on Inivata’s Board of Directors.
Inivata is a VIE and the Company’s investment is under 20% of the total equity outstanding. The Company considers qualitative factors in assessing the primary beneficiary of the VIE which include understanding the purpose and design of the VIE, associated risks that the VIE creates, activities that could be directed by the Company, and the expected relative impact of those activities on the economic performance of the VIE. Based on an evaluation of these factors, the Company concluded that it is not the primary beneficiary of Inivata.
The power to control the activities that most significantly impact Inivata’s economic performance are the sole responsibility of Inivata’s management and Board of Directors; however, the Company does have significant influence over Inivata. As the Preference Shares were determined to not be in-substance common stock, and because the Preference Shares and the Purchase Option do not have readily determinable fair values, the Company has elected to measure the Preference Shares and the Purchase Option at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
On May 22, 2020, the initial $25 million cost and $0.6 million of associated transaction costs for the Investment was allocated between the Preference Shares and the Purchase Option based on the relative fair value of each and was recorded as investment in non-consolidated affiliate on the Consolidated Balance Sheets. The initial relative fair value of the investment in non-consolidated affiliate was comprised of $19.6 million in Preference Shares and a $6 million Purchase Option. The Preference Shares were valued by determining the equity value of Inivata using the Backsolve Method and allocating the value of the Preference Shares using the Option-Pricing Method and the inputs used included the equity value based on the Series C1 capital raised by Inivata, a volatility rate of 84%, a risk-free interest rate of 0.17% and 0% dividend yield. The Purchase Option was valued using the Black-Scholes model with a volatility rate of 84%, a risk-free interest rate of 0.17% and 0% dividend yield.
During the fourth quarter of 2020, an observable transaction of an identical investment in Inivata Preference Shares occurred. This resulted in a remeasurement of the Preference Shares to the value of this observable transaction. The Purchase Option was also remeasured at fair value as a result of this observable transaction. As a result of these remeasurements, at December 31, 2020, the carrying value of the investment in non-consolidated affiliate was $29.6 million, comprised of $25 million in Preference Shares and a $4.6 million Purchase Option. The Company recorded a net unrealized gain of $4 million for these remeasurements for the year ended December 31, 2020 in other expense (income), net on the Consolidated Statements of Operations. At December 31, 2020, the Purchase Option was valued using the Black-Scholes model with a volatility rate of 84%, a risk-free interest rate of 0.17% and 0% dividend yield.
On May 22, 2020, the Company and Inivata also entered into a line of credit agreement in the amount of $15 million (the “Line of Credit”). In January 2021, the Line of Credit, in its entirety, was drawn by Inivata and recorded as a loan receivable from non-consolidated affiliate on the Consolidated Balance Sheets. The Line of Credit matures on December 1, 2025 and the unpaid principal balance is payable on January 1, 2026. The Line of Credit bears interest at 0% per annum. In January 2021, upon the draw of the Line of Credit by Inivata, the Company used an imputed interest rate of 8.33% to present value the Line of Credit. The Company recorded an imputed interest rate discount of $5 million on the loan receivable from non-consolidated affiliate and an additional investment in non-consolidated affiliate of $5 million, resulting in a $10 million present value of the loan receivable from non-consolidated affiliate and increasing the value of the Preference Shares to $30 million. For the three months ended March 31, 2021, $0.2 million of interest income was amortized to the loan receivable from non-consolidated affiliate. The interest income was recorded in interest expense, net, on the Consolidated Statements of Operations. As of March 31, 2021, the loan receivable from non-consolidated affiliate, net of discount, was $10.2 million on the Consolidated Balance Sheets.
In the first quarter of 2021, subsequent to Inivata's draw on the Line of Credit, an observable transaction of an identical investment in Inivata Preference Shares occurred. This resulted in a remeasurement of the Preference Shares to the value of this observable transaction. The Company recorded a net unrealized loss of $5 million for this remeasurement for the three months
20
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 2022December 31, 2021
Clinical Services$462,603 $462,603 
Pharma Services64,512 64,512 
Total$527,115 $527,115 

Intangible assets consisted of the following (in thousands):
  March 31, 2022
 Amortization
Period (years)		CostAccumulated
Amortization		Net
Customer Relationships7 - 15$143,101 $48,228 $94,873 
Developed Technology10 - 15310,226 17,127 293,099 
Marketing Assets4549 135 414 
Trademarks1531,473 1,649 29,824 
Trade Name52,584 406 2,178 
Trademark - Indefinite lived—13,447 — 13,447 
Total $501,380 $67,545 $433,835 
  December 31, 2021
 Amortization
Period (years)		CostAccumulated
Amortization		Net
Customer Relationships7 - 15$143,101 $45,756 $97,345 
Developed Technology10 - 15310,226 11,798 298,428 
Marketing Assets4549 100 449 
Trademarks1531,473 1,125 30,348 
Trade Name52,584 276 2,308 
Trademark - Indefinite lived—13,447 — 13,447 
Total$501,380 $59,055 $442,325 
The Company records amortization expense within cost of revenue and general and administrative expense on the Consolidated Statement of Operations. The following table summarizes the amortization expense for the three months ended March 31, 2022 and 2021 in other(in thousands):
Three Months Ended March 31,
20222021
Amortization of intangibles included in cost of revenue$4,853 $— 
Amortization of intangibles included in general and administrative expenses3,637 2,458
Total amortization of intangibles$8,490 $2,458 
The estimated amortization expense (income), net onrelated to amortizable intangible assets for each of the Consolidated Statements of Operations. Asfollowing periods as of March 31, 2021, the carrying value of the investment in non-consolidated affiliate2022 is $29.6 million, comprised of $25 million in Preference Shares and a $4.6 million Purchase Option.as follows (in thousands):
The Line of Credit is subject to evaluation for current expected credit losses. The impact of such losses were determined to be immaterial at March 31, 2021. There were no such amounts recorded on the Consolidated Balance Sheets as of December 31, 2020.
Remainder of 2022$25,389 
202333,899 
202433,899 
202533,798 
202633,485 
Thereafter259,918 
Total$420,388 
At March 31, 2021, the maximum exposure to losses does not exceed the carrying amount of the investment in non-consolidated affiliate combined with the carrying amount of the loan receivable from non-consolidated affiliate.

Note 6. Debt
2028 Convertible Senior Notes
21
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 7. Debt
The following table summarizes the long-term debt, net at March 31, 2021 and December 31, 2020 (in thousands):
 March 31, 2021December 31, 2020
0.25% Convertible Senior Notes due 2028
Principal$345,000 $0 
Unamortized debt discount(10,049)0 
Unamortized debt issuance costs(233)0 
Total 0.25% Convertible Senior Notes due 2028$334,718 $0 
1.25% Convertible Senior Notes due 2025
Principal$201,250 $201,250 
Unamortized debt discount(4,974)(32,592)
Unamortized debt issuance costs(616)(538)
Total 1.25% Convertible Senior Notes due 2025$195,660 $168,120 
Equipment financing obligations2,772 3,808 
Total debt$533,150 $171,928 
Less: Current portion of financing obligations(2,089)(2,841)
Total long-term debt, net$531,061 $169,087 
At March 31, 2021, the estimated fair values (Level 2) of the 0.25% Convertible Senior Notes due 2028 and the 1.25% Convertible Senior Notes due 2025 were $301.7 million and $339.2 million, respectively. There was no such estimated fair value as of December 31, 2020 related to the 0.25% Convertible Senior Notes due 2028. At December 31, 2020, the estimated fair value (Level 2) of the 1.25% Convertible Senior Notes due 2025 was $320.9 million. At March 31, 2021 and December 31, 2020, the carrying value of the Company’s equipment financing obligations approximated fair value based on the current market conditions for similar instruments.
2028 Convertible Senior Notes
On January 11, 2021, the Company completed the sale of $345$345.0 million of Convertible Senior Notes with a stated interest rate of 0.25% and a maturity date of January 15, 2028 (the “2028 Convertible Notes”), unless earlier converted, redeemed, or repurchased. The 2028 Convertible Notes were issued at a discounted price of 97% of their principal amount. The total net proceeds from the issuance of the 2028 Convertible Notes and exercise of the Over-allotment Option was approximately $334.4 million, which includes approximately $10.6 million of discounts, commissions and offering expenses paid by the Company. On January 11, 2021 the Company entered into an Indenture (the “Indenture”), with U.S. Bank National Association, as trustee (the “Trustee”), governing the 2028 Convertible Notes. The Company used a portion of the net proceeds from the Offerings to enter into capped call transactions (as described below under the heading “Capped Call Transactions”).
Prior to September 15, 2027, noteholders may convert their 2028 Convertible Notes at their option, only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if theThe last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the 5 business day period after any 5 consecutive trading day period in which the trading price per $1,000 principal amount of 2028 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported salesales price of the Company’s common stock andwas not greater than or equal to 130.0% of the conversion rate on each such trading day; (3) if the Company calls any or allprice of the notes for redemption,2028 Convertible Notes on at any time prior toleast 20 of the closelast 30 consecutive trading days of businessthe quarter ended December 31, 2021. Based on the scheduled trading day immediately precedingterms of the redemption date;2028 Convertible Notes, the holders could not have converted all or (4) upon the occurrencea portion of specified corporate events. On or after September 15, 2027 until the close of business on the second business day immediately preceding the maturity date, noteholders may convert their 2028 Convertible Notes at any time, regardlessin the first quarter of 2022. The last reported sales price of the foregoing circumstances.
Upon conversion, the Company will pay or deliver, as applicable, cash, shares ofCompany’s common stock was not greater than or a combinationequal to 130.0% of cash and sharesthe conversion price of common stock, at its election. The initial conversion rate for the 2028 Convertible Notes is 15.1172 shareson at least 20 of common stock per $1,000 in principal amountthe last 30 consecutive trading days of the quarter ended March 31, 2022. Based on the terms of the 2028 Convertible Notes, equivalent to an initial conversion pricethe holders cannot convert all or a portion of approximately $66.15 per share of common stock. The conversion rate is subject to adjustment as described in the Indenture. In addition,
22
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

following certain corporate events that occur prior to the maturity date as described in the Indenture, the Company will pay a make-whole premium by increasing the conversion rate for a holder who elects to convert itstheir 2028 Convertible Notes in connection with such a corporate event in certain circumstances.the second quarter of 2022. The value of the 2028 Convertible Notes, if-converted, does not exceed the principal amount based on a closing stock price of $48.23$12.15 on March 31, 2021. For2022.
The interest expense recognized on the 2028 Convertible Notes includes $0.2 million, $0.4 million and $8,400 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended March 31, 2021 the Company excluded 4,867,738 shares in diluted weighted average common shares outstanding for the if-converted impact of the 2028 Convertible Notes from the diluted net loss per share calculation as the shares would have an anti-dilutive effect. For further details on the impact of the 2028 Convertible Notes on net loss per share please refer to Note 11. Net Loss Per Share.
The Company may not redeem the 2028 Convertible Notes prior to January 20, 2025. The Company may redeem for cash all or any portion of the 2028 Convertible Notes, at its option, on or after January 20, 2025 if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date of notice by the Company of redemption at a redemption price equal to 100% of the principal amount of the 2028 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2028 Convertible Notes.
If an event involving bankruptcy, insolvency or reorganization events with respect to the Company occurs, then the principal amount of, and all accrued and unpaid interest on, all of the 2028 Convertible Notes then outstanding will immediately become due and payable. If any other default event occurs and is continuing, then noteholders of at least 25% of the aggregate principal amount of the 2028 Convertible Notes then outstanding, by notice to the Company, may declare the principal amount of, and all accrued and unpaid interest on, all of the 2028 Convertible Notes then outstanding to become due and payable immediately. If the Company undergoes a “fundamental change” as defined in the Indenture, then noteholders may require the Company to repurchase their 2028 Convertible Notes at a cash repurchase price equal to the principal amount of the 2028 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
The 2028 Convertible Notes are the Company’s senior, unsecured obligations and will be equal in right of payment with its existing and future senior, unsecured indebtedness, senior in right of payment to its existing and future indebtedness that is expressly subordinated to the 2028 Convertible Notes and effectively junior to its existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness. The 2028 Convertible Notes will be structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, of its subsidiaries.
2022. The interest expense recognized on the 2028 Convertible Notes includes $0.2 million, $0.4 million and $6,700 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended March 31, 2021. There were no such amounts for the three months ended March 31, 2020. The effective interest rate on the 2028 Convertible Notes is 0.70%, which includes the interest on the 2028 Convertible Notes and amortization of the debt discount and debt issuance costs. The 2028 Convertible Notes bear interest at a rate of 0.25% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2021.
Capped Call Transactions
In connection withAt March 31, 2022, the estimated fair values (Level 2) of the 0.25% Convertible Senior Notes due 2028 Convertible Notes offering, on January 11,was $231.4 million. At December 31, 2021, the Company entered into separate, privately negotiated convertible note hedge transactions (collectively, the “Capped Call Transactions”) with option counterparties pursuant to capped call confirmations at a cost of approximately $29.3 million. As the Capped Call Transactions meet certain accounting criteria, the Capped Call Transactions were classified as equity, are not accounted for as derivatives and were recorded as a reductionestimated fair value (Level 2) of the Company’s additional paid-in capital in the accompanying Consolidated Financial Statements. The Capped Call Transactions are not part of the terms of the0.25% Convertible Senior Notes due 2028 Convertible Notes and will not affect any holders’ rights under the 2028 Convertible Notes. The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that initially underlie the 2028 Convertible Notes. The number of shares underlying the Capped Call Transactions is 5.2was $297.6 million.
The cap price of the Capped Call Transactions is initially $85.75 per share of the Company's common stock, which represents a premium of 75% over the public offering price of the common stock in the 2021 Common Stock Offering, which was $49.00 per share, and is subject to certain adjustments under the terms of the Capped Call Transactions.
By entering into the Capped Call Transactions, the Company expects to reduce the potential dilution to its common stock (or, in the event a conversion of the 2028 Convertible Notes is settled in cash, to reduce its cash payment obligation) in the event that, at the time of conversion of the 2028 Convertible Notes, its common stock price exceeds the conversion price of the 2028 Convertible Notes.
2025 Convertible Senior Notes
23
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

On May 4, 2020, the Company completed the sale of $201.3 million of Convertible Senior Notes with a stated interest rate of 1.25% and a maturity date of May 1, 2025 (the “2025 Convertible Notes”), unless earlier converted, redeemed, or repurchased. The 2025 Convertible Notes were issued at a discounted price of 97% of their principal amount. The total net proceeds from the issuance of the 2025 Convertible Notes and exercise of the Over-allotment Option was approximately $194.5 million, which includes approximately $6.9 million of discounts, commissions and offering expenses paid by the Company. On May 4, 2020, the Company entered into an Indenture (the “Indenture”), with U.S. Bank National Association, as trustee (the “Trustee”), governing the 2025 Convertible Notes.
Prior to February 1, 2025, noteholders may convert their 2025 Convertible Notes at their option, only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the 5 business day period after any 5 consecutive trading day period in which the trading price per $1,000 principal amount of 2025 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (3) if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after February 1, 2025 until the close of business on the business day immediately preceding the maturity date, noteholders may convert their 2025 Convertible Notes at any time, regardless of the foregoing circumstances.
The last reported sales price of the Company’s common stock was not greater than or equal to 130%130.0% of the conversion price of the 2025 Convertible Notes on at least 20 of the last 30 consecutive trading days of the quartersquarter ended March 31, 2021 and December 31, 2020.2021. Based on the terms of the 2025 Convertible Notes, the holders may convert all or a portion of their 2025 Convertible Notes in the second quarter of 2021 and could not have converted all or a portion of their 2025 Convertible Notes in the first quarter of 2021. When a conversion notice is received, the Company has the option to pay or deliver cash, shares2022. The last reported sales price of the Company’s common stock was not greater than or a combination thereof. Asequal to 130.0% of the Company is not required to settleconversion price of the 2025 Convertible Notes in cash,on at least 20 of the last 30 consecutive trading days of the quarter ended March 31, 2022. Based on the terms of the 2025 Convertible Notes, are classified as long-term debt as of March 31, 2021 and December 31, 2020. As of March 31, 2021, the Company had not received any conversion notices.
Upon conversion, the Company will pay or deliver, as applicable, cash, shares of common stockholders cannot convert all or a combinationportion of cash and shares of common stock, at its election. The initial conversion rate for the 2025 Convertible Notes is 27.5198 shares of common stock per $1,000 in principal amounts of 2025 Convertible Notes, equivalent to an initial conversion price of approximately $36.34 per share of common stock. The conversion rate is subject to adjustment as described in the Indenture. In addition, following certain corporate events that occur prior to the maturity date as described in the Indenture, the Company will pay a make-whole premium by increasing the conversion rate for a holder who elects to convert itstheir 2025 Convertible Notes in connection with such a corporate event in certain circumstances.the second quarter of 2022. The value of the 2025 Convertible Notes, if-converted, exceedsdoes not exceed the principal amount by $65.9 million based on a closing stock price of $48.23$12.15 on March 31, 2021. For the three months ended March 31, 2021 the Company excluded 5,538,360 shares in diluted weighted average common shares outstanding for the if-converted impact of the 2025 Convertible Notes from the diluted net loss per share calculation as the shares would have an anti-dilutive effect. For further details on the impact of the 2025 Convertible Notes on net loss per share please refer to Note 11. Net Loss Per Share.
The Company may not redeem the 2025 Convertible Notes prior to May 6, 2023. The Company may redeem for cash all or any portion of the 2025 Convertible Notes, at its option, on or after May 6, 2023 if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date of notice by the Company of redemption at a redemption price equal to 100% of the principal amount of the 2025 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2025 Convertible Notes.
If an event involving bankruptcy, insolvency or reorganization events with respect to the Company occurs, then the principal amount of, and all accrued and unpaid interest on, all of the 2025 Convertible Notes then outstanding will immediately become due and payable. If any other default event occurs and is continuing, then noteholders of at least 25% of the aggregate principal amount of the 2025 Convertible Notes then outstanding, by notice to the Company, may declare the principal amount of, and all accrued and unpaid interest on, all of the 2025 Convertible Notes then outstanding to become due and payable immediately. If the Company undergoes a “fundamental change” as defined in the Indenture, then noteholders may require the Company to repurchase their 2025 Convertible Notes at a cash repurchase price equal to the principal amount of the 2025 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
24
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

The 2025 Convertible Notes are the Company’s senior, unsecured obligations and will be equal in right of payment with its existing and future senior, unsecured indebtedness, senior in right of payment to its existing and future indebtedness that is expressly subordinated to the 2025 Convertible Notes and effectively junior to its existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness. The 2025 Convertible Notes will be structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, of its subsidiaries.2022.
The interest expense recognized on the 2025 Convertible Notes includes $0.6 million, $0.3 million and $0.04 million for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended March 31, 2021. There were no such amounts2022. The interest expense recognized on the 2025 Convertible Notes includes $0.6 million, $0.3 million and $0.04 million for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended March 31, 2020.2021. The effective interest rate on the 2025 Convertible Notes is 1.96%, which includes the interest on the 2025 Convertible Notes and amortization of the debt discount and debt issuance costs. The 2025 Convertible Notes bear interest at a rate of 1.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, which began on November 1, 2020.
Equipment Financing Obligations
The Company has entered into loans with various banks to finance the purchase of laboratory equipment, office equipment and leasehold improvements. These loans mature at various dates through 2023 and the weighted average interest rate under such loans was approximately 5.07% as ofAt March 31, 2021 and 4.91% as2022, the estimated fair values (Level 2) of the 1.25% Convertible Senior Notes due 2025 was $176.1 million. At December 31, 2020.
Maturities2021, the estimated fair value (Level 2) of Long-Term Debt
Maturities of long-term debt as of March 31, 2021 are summarized as follows (in thousands):
 0.25% Convertible Senior Notes1.25% Convertible Senior NotesEquipment
Financing Obligations		Total Debt
Remainder of 2021$0 $0 $1,761 $1,761 
20220 0 984 984 
20230 0 27 27 
20240 0 0 0 
20250 201,250 0 201,250 
Thereafter345,000 0 0 345,000 
Total Debt$345,000 $201,250 $2,772 $549,022 
Less: Current portion of long-term debt0 0 (2,089)(2,089)
Less: Unamortized debt discount(10,049)(4,974)0 (15,023)
Less: Unamortized debt issuance costs(233)(616)0 (849)
Long-term debt, net$334,718 $195,660 $683 $531,061 
the 1.25% Convertible Senior Notes due 2025 was $238.9 million.

2522
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 8. Equity Transactions
Underwritten Public Equity Offering
On January 6, 2021, the Company entered into an underwriting agreement relating to the issuance and sale of 4,081,632 shares of the Company’s common stock, $0.001 par value per share (the “2021 Common Stock Offering”). The price to the public in this offering was $49.00 per share. The net proceeds to the Company from the 2021 Common Stock Offering were approximately $189.9 million, after deducting underwriting discounts, commissions and other offering expenses of approximately $10.1 million.
Under the terms of the underwriting agreement, the Company also granted the Underwriters a 30-day option to purchase up to 612,244 additional shares of Common Stock at the public offering price, less underwriting discounts and commissions. On January 6, 2021, the Underwriters exercised their option and purchased all 612,244 shares. The net proceeds related to the option exercise were approximately $28.4 million, after deducting underwriting discounts, commissions and other offering expenses of approximately $1.6 million.
On April 29, 2020, the Company entered into an underwriting agreement relating to the issuance and sale of 4,400,000 shares of the Company’s common stock, $0.001 par value per share (the “2020 Common Stock Offering”). The price to the public in this offering was $28.50 per share. The net proceeds to the Company from the 2020 Common Stock Offering were approximately $117.9 million, after deducting underwriting discounts, commissions and other offering expenses of approximately $7.5 million.
Under the terms of the underwriting agreement, the Company also granted the Underwriters a 30-day option to purchase up to 660,000 additional shares of Common Stock at the public offering price, less underwriting discounts and commissions. On May 29, 2020, the Underwriters partially exercised their option and on June 3, 2020, purchased an additional 351,500 shares. The net proceeds related to the option exercise were approximately $9.4 million, after deducting underwriting discounts, commissions and other offering expenses of approximately $0.6 million.
26
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 9.7. Stock-Based Compensation
The Company recorded approximately $12.1 million and $2.7 million and $2.2 million infor stock-based compensation expensein general and administrative expenses on the Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021, and 2020, respectively.
Stock Options
A summary of the stock option activity under the Company’s plans for the three months ended March 31, 20212022 is as follows:
Number of
Shares		Weighted Average Exercise Price
Options outstanding at December 31, 20212,961,195 $25.46 
Options granted1,218,481 $25.03 
Less:
Options exercised471,609 $13.70 
Options forfeited747,269 $29.56 
Options outstanding at March 31, 20222,960,798 $26.11 
Exercisable at March 31, 20221,343,021 $19.37 
Number of
Shares		Weighted Average Exercise Price
Options outstanding at December 31, 20203,785,941 $15.21 
Options granted251,771 $53.16 
Less:
Options exercised260,167 $8.60 
Options forfeited54,296 $19.53 
Options outstanding at March 31, 20213,723,249 $18.17 
Exercisable at March 31, 20212,141,203 $11.20 
The fair value of each stock option award granted during the three months ended March 31, 20212022 was estimated as of the grant date using a Black-Scholes model with the following weighted average assumptions:
 Three Months Ended
March 31, 20212022
Expected term (in years)4.04 - 5.5
Risk-free interest rate (%)0.6%1.6%
Expected volatility (%)38.7%42% - 46.6%49%
Dividend yield (%)0—
Weighted average fair value/share at grant date fair value per share$19.429.98
 
As of March 31, 2021,2022, there was approximately $9$12.5 million of unrecognized stock-based compensation expense related to stock options that will be recognized over a weighted-average period of approximately 2.202.2 years.

Restricted Stock Awards
A summary of the restricted stock activity under the Company’s plans for the three months ended March 31, 20212022 is as follows:
Number of Restricted
Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2020291,891 $23.82 
Granted100,847 $53.17 
Vested(55,282)$22.91 
Forfeited(5,474)$24.14 
Nonvested at March 31, 2021331,982 $32.89 

Number of Restricted
Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2021851,403 $36.00 
Granted516,014 $25.67 
Vested(171,687)$35.13 
Forfeited(357,205)$30.71 
Nonvested at March 31, 2022838,525 $32.07 
As of March 31, 2021,2022, there was approximately $7.5$19.1 million of unrecognized stock-based compensation expense related to restricted stock that will be recognized over a weighted-average period of approximately 1.682.0 years.
EmployeeModification of Stock Purchase Plan (“ESPP”)Option and Restricted Stock Awards
The Company offers an ESPP through which eligible employees may purchase shares of the Company’s common stock at a discount of 15% of the fair market value of the Company’s common stock. 
DuringIn the three months ended March 31, 20212022, upon the Chief Executive Officer’s departure from the Company and 2020, employees purchased 23,917in accordance with the terms of the Chief Executive Officer’s separation agreement, 237,960 previously granted time-based vesting stock option awards and 34,330 shares, respectively, under142,302 previously granted time-vesting restricted stock awards accelerated vesting. The Company accounted for the ESPP. The expense recorded foreffects of the accelerated vesting of these periods was approximately $0.2stock awards as a modification, and recognized $5.9 million of incremental stock-based compensation which consisted of $2.3 million and $0.2$3.6 million respectively.for the acceleration of stock option awards and restricted stock awards, respectively, within general and administrative expenses on the Consolidated Statements of Operations for the three months ended March 31, 2022.

2723
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 10.8. Revenue Recognition
The Company hasCompany’s 2 operatingreportable segments for which it recognizes revenue;revenue are (1) Clinical Services and (2) Pharma Services. The Clinical Services segment provides various clinical testing services to community-based pathology practices, oncology practices, hospital pathology labs, reference labs, and academic centers with reimbursement from various payers including client direct billing, commercial insurance, Medicare and other government payers, and patients. Due to the broad roll-out of the COVID-19 vaccine and a sharp decline in COVID-19 PCR testing demand, the Company made the decision at the end of the first quarter 2021 to exit from COVID-19 PCR testing which was part of Clinical Services segment revenues. The Pharma Services segment supports pharmaceutical firms in their drug development programs by providing testing services and data analytics for clinical trials and research.
Clinical Services Revenue

The Company’s specialized diagnostic services are performed based on a written test requisition form or electronic equivalent. The performance obligation is satisfied and revenues are recognized once the diagnostic services have been performed and the results have been delivered to the ordering physician. These diagnostic services are billed to various payers, including client direct billing, commercial insurance, Medicare and other government payers, and patients. Revenue is recorded for all payers based on the amount expected to be collected, which considers implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration the Company expects to receive based on negotiated discounts, historical collection experience and other anticipated adjustments, including anticipated payer denials. Collection of consideration the Company expects to receive typically occurs within 30 to 60 days of billing for commercial insurance, Medicare and other governmental and self-pay payers and within 60 to 90 days of billing for client payers.

Pharma Services Revenue

The Company’s Pharma Services segment generally enters into contracts with pharmaceutical customers as well as other CROs to provide research and clinical trial services ranging in duration from one month to several years. The Company records revenue on a unit-of-service basis based on number of units completed and the total expected contract value. The total expected contract value is estimated based on historical experience of total contracted units compared to realized units as well as known factors on a specific contract-by-contract basis. Certain contracts include upfront fees, final settlement amounts, and/or billing milestones that may not align with the completion of performance obligations. The value of these upfront fees or final settlement amounts is usually recognized over time based on the number of units completed, which aligns with the progress of the Company towards fulfilling its obligations under the contract.
The Company also enters into other contracts, such as validation studies and informatics. Revenue for validation studies for which the sole deliverable may be a final report that is sent to sponsorsthe sponsor(s) at the completion of contracted activities, is recognized at a point in time upon delivery of the final report to the sponsor. Informatics is the sale of de-identified data for which deliverables typically consist of retrospective records or prospective deliveries of data. Informatics revenue is recognized upon delivery of retrospective data or over time for prospective data feeds. Any contracts that contain multiple performance obligations and include both units-of-service and point in time deliverables are accounted for as separate performance obligations and revenue is recognized as previously disclosed. The Company negotiates billing schedules and payment terms on a contract-by-contract basis. While the contract terms generally provide for payments based on a unit-of-service arrangement, the billing schedules, payment terms, and related cash payments may not align with the performance of services and, as such, may not correspond to revenue recognized in any given period.
Amounts collected in advance of services being provided are deferred as contract liabilities on the Consolidated Balance Sheets. The associated revenue is recognized and the contract liability is reduced as the contracted services are subsequently performed. Contract assets are established for revenue that has been recognized but not yet billed. These contract assets are reduced once the customer is invoiced and a corresponding receivable is recorded. Additionally, certain costs to obtain contracts, primarily for sales commissions, are capitalized when incurred and are amortized over the term of the contract. Amounts capitalized for contracts with an initial contract term of twelve months or less are classified as current assets. All others are classified as non-current assets.
Most contracts are terminable by the customer,customers, either immediately or according to advance notice terms specified within the contracts. All contracts require payment of fees to the Company for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract.
The following table summarizes the values of contract assets, capitalized commissions and contract liabilities (in thousands):

2824
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

March 31, 2021December 31, 2020March 31, 2022December 31, 2021
Current pharma contract assets (1)
Current pharma contract assets (1)
$2,014 $1,643 
Current pharma contract assets (1)
$1,643 $1,738 
Long-term pharma contract assets (2)
Long-term pharma contract assets (2)
355 290 
Long-term pharma contract assets (2)
261 236 
Total pharma contract assetsTotal pharma contract assets$2,369 $1,933 Total pharma contract assets$1,904 $1,974 
Current pharma capitalized commissions (1)
Current pharma capitalized commissions (1)
$182 $185 
Current pharma capitalized commissions (1)
$168 $109 
Long-term pharma capitalized commissions (2)
Long-term pharma capitalized commissions (2)
1,020 970 
Long-term pharma capitalized commissions (2)
972 882 
Total pharma capitalized commissionsTotal pharma capitalized commissions$1,202 $1,155 Total pharma capitalized commissions$1,140 $991 
Current pharma contract liabilitiesCurrent pharma contract liabilities$3,992 $4,029 Current pharma contract liabilities$6,119 $5,192 
Long-term pharma contract liabilities (3)
Long-term pharma contract liabilities (3)
705 712 
Long-term pharma contract liabilities (3)
1,081 917 
Total pharma contract liabilitiesTotal pharma contract liabilities$4,697 $4,741 Total pharma contract liabilities$7,200 $6,109 
(1) Current pharma contract assets and Current pharma capitalized commissions are classified as other current assets on the Consolidated Balance Sheets.
(2) Long-term pharma contract assets and Long-term pharma capitalized commissions are classified as other assets on the Consolidated Balance Sheets.
(3) Long-term pharma contract liabilities are classified as other long-term liabilities on the Consolidated Balance Sheets.
Pharma contract assets increased $0.4 million, or 23%, from December 31, 2020 to March 31, 2021. Pharma contract liabilities and capitalized commissions remained flat during the same period. Revenue recognized for the three months ended March 31, 20212022 and March 31, 20202021 related to Pharma contract liability balances outstanding at the beginning of the period was $2.7$3.1 million and $1.2was $2.7 million, respectively. Amortization of capitalized commissions for the three-monthsthree months ended March 31, 2022 and 2021 and March 31, 2020, was $0.2$0.1 million and $0.2 million, respectively.
Disaggregation of Revenue
The Company considered various factors for both its Clinical Services and Pharma Services segments in determining appropriate levels of homogeneous data for its disaggregation of revenue,revenue; including the nature, amount, timing, and uncertainty of revenue and cash flows. For Clinical Services the categories identified align with the typetypes of customercustomers due to similarities of billing method, level of reimbursement, and timing of cash receipts. Unbilled amounts are accrued and allocated to payer categories based on historical experience. In future periods actual billings by payer category may differ from accrued amounts. Pharma Services revenue was not further disaggregated as substantially all of the revenue relatesrelate to contracts with large pharmaceutical and biotech customers as well as other CROs for whichCROs. Because the nature, timing, and uncertainty of revenue and cash flows isare similar and primarily driven by individual contract terms.terms Pharma Services revenue is not further disaggregated.
The following table details the disaggregation of revenue for both the Clinical and Pharma Services Segments (in thousands):
Three Months Ended March 31,Three Months Ended March 31,
2021202020222021
Clinical Services:Clinical Services:Clinical Services:
Client direct billing Client direct billing$60,709 $54,292  Client direct billing$65,014 $60,709 
Commercial Insurance Commercial Insurance18,574 21,993  Commercial Insurance18,288 18,574 
Medicare and Medicaid Medicare and Medicaid17,150 16,483  Medicare and Medicaid15,465 17,150 
Self-Pay Self-Pay54 214  Self-Pay24 54 
Total Clinical ServicesTotal Clinical Services$96,487 $92,982 Total Clinical Services$98,791 $96,487 
Pharma Services:Pharma Services:19,046 13,048 Pharma Services:18,378 19,046 
Total RevenueTotal Revenue$115,533 $106,030 Total Revenue$117,169 $115,533 

Note 9. Income Taxes
At the end of each interim period, management estimates the annual effective tax rate based on forecasted pre-tax results of the Company’s global operations and applies such rate to its ordinary quarterly earnings to calculate income tax expense related to ordinary income. The tax effects of items significant, unusual and infrequent in nature are discretely calculated and recognized
29
25
NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

in the period during which they occur. These discrete items often relate to changes in tax laws, excess tax benefits/deficiencies related to share-based compensation or adjustments to previously reported tax expense/benefits.
Management assesses the recoverability of its deferred tax assets as of the end of each quarter, weighing available positive and negative evidence, and is required to establish and maintain a valuation allowance for these assets if it is more likely than not that some or all of the deferred income tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to support a conclusion that a valuation allowance is not needed.
A cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome. Cumulative loss in recent years is commonly defined as a three-year cumulative loss position. As of March 31, 2022, the Company’s U.S. ongoing operations were in a three-year cumulative loss position. Management determined that sufficient objectively verifiable positive evidence did not exist to overcome the negative evidence of the Company’s U.S. cumulative loss position. Accordingly, the Company’s estimated annual effective tax rate applied to the Company’s pre-tax loss for the three months ended March 31, 2022, includes the unfavorable impact of a valuation allowance against the Company’s deferred income tax assets expected to be created in 2022 for additional U.S. net operating loss and tax credit carryforwards.
Note 11.10. Net Loss Per Share
The Company presents both basic earnings per share (“EPS”) and diluted EPS. Basic EPS excludes potential dilution and is computed by dividing “Net loss”net loss by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock awards were exercised and if the 2028 Convertible Notes and 2025 Convertible Notes were converted. The potential dilution from stock awards is accounted for using the treasury stock method based on the average market value of the Company’s common stock. The potential dilution from conversion of the 2028 Convertible Notes and 2025 Convertible Notes is accounted for using the if-converted method, which requires that all of the shares of the Company’s common stock issuable upon conversion of the 2028 Convertible Notes and the 2025 Convertible Notes will be included in the calculation of diluted EPS assuming conversion of the 2028 Convertible Notes and the 2025 Convertible Notes at the beginning of the reporting period (or at time of issuance, if later).
The following table shows the calculations(incalculations (in thousands, except net loss per share amounts).:
Three Months Ended March 31,
20222021
NET LOSS$(49,408)$(22,114)
Basic weighted average shares outstanding123,630 116,199 
Diluted weighted average shares outstanding123,630 116,199 
Basic net loss per share$(0.40)$(0.19)
Diluted net loss per share$(0.40)$(0.19)

Three Months Ended March 31,
20212020
Net loss$(22,114)$(6,978)
Basic weighted average shares outstanding116,199 104,484 
Diluted weighted average shares outstanding116,199 104,484 
Basic net loss per share$(0.19)$(0.07)
Diluted net loss per share$(0.19)$(0.07)

The following potential dilutive shares were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.anti-dilutive (in thousands):
Three Months Ended March 31,
20222021
Stock options467 2,418 
Restricted stock awards137 216 
2025 Convertible Notes5,538 5,538 
2028 Convertible Notes5,215 4,868 

Three Months Ended March 31,
20212020
Stock options2,417,804 3,153,959 
Restricted stock awards216,407 322,559 
2025 Convertible Notes5,538,360 0 
2028 Convertible Notes4,867,738 0 

In connection with the 2028 Convertible Notes offering, on January 11, 2021, the Company entered into separate, privately negotiated convertible note hedge transactions (collectively, the “Capped Call Transactions”) with option counterparties pursuant to capped call confirmations at a cost of approximately $29.3 million. The potential effect of the Capped Call Transactions entered into concurrently with the 2028 Convertible Notes were excluded from the calculation of diluted net loss per share in the three months ended March 31, 20212022 as the Company’s closing price on March 31, 20212022 did not exceed the conversion price of $85.75 per share. The Capped Call Transactions are not reflected in diluted net loss per share as they are anti-dilutive.
For further details on the Capped Call Transactions, please refer to Note 7. Debt.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 11. Commitments and Contingencies
Legal Proceeding
On January 20, 2021, Natera, Inc. filed a patent infringement complaint against the Company’s newly-acquired subsidiary Inivata Limited and its subsidiary Inivata, Inc. in United States District Court for the district of Delaware, alleging Inivata’s InVisionFirst-Lung™ cancer diagnostic test of infringing 2 patents. The litigation is presently in the pleadings stage. The Company believes that it has good and substantial defenses to the claims alleged in the suit, but there is no guarantee that the Company will prevail. At the time of filing, the outcome of this matter is not estimable or probable.
Regulatory Matter
With the assistance of outside counsel, the Company is voluntarily conducting an internal investigation that focuses on the compliance of certain consulting and service agreements with federal healthcare laws and regulations, including those relating to fraud, waste and abuse. Based on this internal investigation, the Company voluntarily notified the Office of Inspector General of the U.S. Department of Health and Human Services (“OIG”) of the Company’s internal investigation in November 2021. The Company’s review of this matter is ongoing. The Company has a reserve of $11.2 million in other long-term liabilities as of March 31, 2022 and December 31, 2021 on the Consolidated Balance Sheets for potential damages and liabilities primarily associated with the federal healthcare program revenue received by the Company in connection with the agreements at issue that were identified during the course of this internal investigation. This reserve reflects management’s best estimate of the minimum probable loss associated with this matter. As a result of the ongoing investigation and interactions with regulatory authorities, the Company may accrue additional reserves for any related potential damages and liabilities arising out of this matter. At this time, the Company is unable to predict the duration, scope, result or related costs associated with any further investigation, including by the OIG, or any other governmental authority, or what penalties or remedial actions they may seek. Accordingly, at this time, the Company is unable to estimate a range of possible loss in excess of the amount reserved. Any determination that the Company’s operations or activities are not in compliance with existing laws or regulations, however, could result in the imposition of civil or criminal fines, penalties, disgorgement, restitution, equitable relief, or other losses or conduct restrictions, which could be material to the Company’s financial results or business operations.

Note 12. Related Party Transactions
On May 22, 2020, the Company formed a strategic alliance with Inivata Limited, a company incorporated in England and Wales (“Inivata”), and entered into a Strategic Alliance Agreement and Laboratory Services Agreement whereas Inivata, willprior to the Inivata Acquisition Date, would render and perform certain laboratory testing which the Company will makemade available to customers. In connection with this agreement, Inivata provided $0.4 million of testing services to the Company recorded in cost of revenue in the Consolidated Statements of Operations for the three months ended March 31, 2021. NaN such services were provided for the three months ended March 31, 2020.
The Company and Inivata also entered into a Line of Credit in the amount of $15 million. In JanuaryOn June 18, 2021, the LineCompany completed its acquisition of Credit,all remaining equity interest in Inivata by exercising its entirety, was drawn byPurchase Option. Beginning June 18, 2021, Inivata and recorded asis a loan receivable from non-consolidated affiliate onwholly-owned consolidated subsidiary of the Company. As of the Inivata Acquisition Date, Inivata’s financial statement activity is being consolidated within the Company’s unaudited Consolidated Balance Sheets. The Line of Credit matures on December 1, 2025 and the unpaid principal balance is payable on January 1, 2026. The Line of Credit bears interest at 0% per annum.
Financial Statements. For further details on the investment made inacquisition of Inivata, and Line of Credit, please refer to Note 6. Investment in Non-Consolidated Affiliate.
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NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)3. Acquisitions.

Note 13. Segment Information
The Company hasrecognizes revenue under 2 operatingreportable segments, for which it recognizes revenue;(1) Clinical Services and (2) Pharma Services. The Company’s Clinical Services segment provides various clinical testing services to community-based pathology and oncology practices, hospital pathology labs, and academic centers with reimbursement from various payers including client direct billing, commercial insurance, Medicare and other government payers, and self-pay patients. The Company’s Pharma Services segment supports pharmaceutical firms in theirfirms’ drug development programs by supportingassisting with various clinical trials and research as well as providing informatics related services often supporting Pharmapharmaceutical commercialization efforts.
The financial information reviewed by the Chief Operating Decision Maker (“CODM”) includes revenues, cost of revenue, and gross profit for each of the Company’s operatingboth reportable segments. Assets are not presented at the segment level as that information is not used by the CODM.
The following table summarizes the segment information (in thousands):

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NEOGENOMICS, INC.
Three Months Ended March 31,
20212020
Net revenues:
Clinical Services$96,487 $92,982 
Pharma Services19,046 13,048 
Total revenue115,533 106,030 
Cost of revenue:
Clinical Services(1)
61,565 48,923 
Pharma Services12,394 10,738 
Total cost of revenue73,959 59,661 
Gross Profit:
Clinical Services34,922 44,059 
Pharma Services6,652 2,310 
Total gross profit41,574 46,369 
Operating expenses:
General and administrative40,476 36,344 
Research and development2,456 2,060 
Sales and marketing13,749 13,258 
Total operating expenses56,681 51,662 
Loss from operations(15,107)(5,293)
Interest expense, net1,177 819 
Other expense (income), net4,854 (223)
Loss before taxes(21,138)(5,889)
Income tax expense976 1,089 
Net loss$(22,114)$(6,978)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)
Three Months Ended March 31,
20222021
Net revenues:
Clinical Services$98,791 $96,487 
Pharma Services18,378 19,046 
Total revenue117,169 115,533 
Cost of revenue:
Clinical Services(1)
65,267 61,565 
Pharma Services(2)
13,670 12,394 
Total cost of revenue78,937 73,959 
Gross Profit:
Clinical Services33,524 34,922 
Pharma Services4,708 6,652 
Total gross profit38,232 41,574 
Operating expenses:
General and administrative66,248 40,476 
Research and development7,713 2,456 
Sales and marketing16,299 13,749 
Total operating expenses90,260 56,681 
Loss from operations(52,028)(15,107)
Interest (income) expense, net1,301 1,177 
Other (income) expenses, net(168)4,854 
Loss before taxes(53,161)(21,138)
Income tax (benefit) expense(3,753)976 
Net loss$(49,408)$(22,114)
(1) Clinical Services cost of revenue includes $4.3 million of amortization of acquired Inivata developed technology for the three months ended March 31, 2022. Clinical Services cost of revenue includes write-offs of $5.3 million for COVID-19 PCR testing inventory for the three months ended March 31, 2021.
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NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(2)
Note 14. Subsequent Events
On April 7, 2021,Pharma Services cost of revenue for the Company, through its wholly-owned subsidiary NeoGenomics Bioinformatics, Inc. closed onthree months ended March 31, 2022 includes $0.6 million of amortization of acquired Inivata developed technology intangible assets. There were no such amounts for the acquisition of Intervention Insights, Inc. d/b/a Trapelo Health, an Information Technology company focused on precision oncology. The agreement purchase price was $65 million, and consisted of $35 million in cash on hand and $30 million in the Company’s common stock.
On May 4, 2021, the Company, through its wholly-owned subsidiary NeoGenomics Laboratories, Inc. entered into a Share Purchase Agreement to acquire Inivata. The Company exercised its Purchase Option which was part of the Investment Agreement with Inivata as described in Note 6. Investment in Non-Consolidated Affiliate. Pursuant to the Share Purchase Agreement, the Company will pay Inivata's other shareholders consideration in an aggregate amount of $390 million, adjusted to reflect certain cash and debt items at closing, which will result in Inivata becoming a wholly-owned subsidiary of the Company. The consideration will be satisfied in cash and, to the extent any shareholder elects in accordance with the terms of the Share Purchase Agreement, shares of the Company's common stock, the price of which is based upon 95% of the average of the volume-weighted average prices of the common stock over the ten trading day periodthree months ended May 4,March 31, 2021.
On May 4, 2021, the Company entered into a Securities Purchase Agreement with certain purchasers (the “Purchasers”), pursuant to which the Company agreed to sell and issue to the Purchasers, in a private placement (the “Private Placement”), shares of common stock of the Company. The closing of the Private Placement is anticipated to occur in June 2021, subject to the satisfaction of customary closing conditions and the closing of the Company’s acquisition of Inivata. The Company agreed to sell and issue 4,444,445 shares of common stock at a purchase price of $45.00 per share for aggregate gross proceeds to the Company of approximately $200 million, before deducting fees to the placement agents and other estimated offering expenses payable by the Company.



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NeoGenomics, Inc., a Nevada corporation (referred to individually as the “Parent Company” or collectively with its subsidiaries as “NeoGenomics”, “we”, “us”,“NeoGenomics,” “we,” “us,” “our” or the “Company” in this Form 10-Q)Quarterly Report) is the registrant for SEC reporting purposes. Our common stock is listed on theThe Nasdaq Stock Market LLC (“NASDAQ”Nasdaq”) under the symbol “NEO”.
Introduction
The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the notes thereto included herein. The information contained below includes statements of the Company’s or management’s beliefs, expectations, hopes, goals and plans that, if not historical, are forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion on forward-looking statements, see the information set forth in the introductory note to this quarterly reportQuarterly Report on Form 10-Q under the caption “Forward-Looking Statements”,Statements,” which information is incorporated herein by reference.
COVID-19 Pandemic
In December 2019 a novel strain of coronavirus (“COVID-19”) was identified and the disease has since spread across the world, including the United States. In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The outbreak of the pandemic is materially adversely affecting the Company’s employees, patients, communities and business operations, as well as the United States (“U.S.”) economy and financial markets. The full extent to which the COVID-19 outbreakpandemic will impact the Company’s business, results of operations, financial condition, and cash flows will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national, and international markets. As the COVID-19 pandemic continues, the Company’s results of operations, financial condition and cash flows are likely to continue to be materially adversely affected, particularly if the pandemic persists for a significant amount of time.
The impact from the COVID-19 pandemic and the related disruptions have had a materialsignificant adverse impact on our results of operations, volume growth rates and test volumes in 20202021 and the first quarter of 2021.2022. Demand may fluctuate depending on the duration and severity of the COVID-19 pandemic, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties. Such events may result in business disruption, reduced revenues and a decreased number of tests, any of which could materially affect our business, financial condition, and results of operations.
We have taken significant actions to protect our employees and maintain a safe environment while ensuring continuity of critical oncology testing for cancer patients. Among other actions, we have de-densified our laboratories and facilities, adjusted laboratory shifts, restricted visitors to facilities, restricted employee travel, implemented an emergency paid time off policy, provided remote work-environment training and support, and managed our supply chains. Importantly, all main laboratory facilities have remained open and there has been an uninterrupted continuity of high-quality testing services for clients. The Company’s top priority remains the health and safety of employees and continued quality and service for all clients with a focus on patient care. We believe that we are positioned to recover from the effects of the COVID-19 pandemic.
For additional information on risk factors related to the pandemic or other risks that could impact our results, please refer to the Company’s Form 10-K under Item 1A, “Risk Factors” for the year ended December 31, 2020,2021, as filed with the SEC on February 25, 2021.2022, and in Part II, Item 1A. “Risk Factors” in the Quarterly Report on Form 10-Q.
Overview
We operate a network of cancer-focused testing laboratories in the United States, Europe and Asia. Our mission is to improve patient care through exceptional cancer-focused testing services. Our vision is to becomebe the world’s leading cancer testing and information company by delivering uncompromising quality, exceptional service and innovative solutions.
As of March 31, 2021,2022, the Company has laboratory locationsoperates CAP accredited and CLIA certified laboratories in Fort Myers and Tampa, Florida; Aliso Viejo, Carlsbad and San Diego, California; Research Triangle Park, North Carolina; Houston, Texas; Atlanta, Georgia; Nashville, Tennessee; and Phoenix, Arizona; and CAP accredited laboratories in Cambridge, United Kingdom; Rolle, Switzerland; and Singapore. We currently offer the following types of testing services:
a.•Cytogenetics (“karyotype analysis”) -– the study of normal and abnormal chromosomes and their relationship to disease. Cytogenetics involves analyzing the chromosome structure to identify changes from patterns seen in normal chromosomes. Cytogenetic studies are often performed to provide diagnostic, prognostic and occasionally predictive information for patients with hematological malignancies.
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b.•Fluorescence In-Situ Hybridization (“FISH”) -– a molecular cytogenetic technique that focuses on detecting and localizing the presence or absence of specific DNA sequences and genes on chromosomes. The technique uses fluorescent probes that bind to only those parts of the chromosome with which they show a high degree of sequence similarity. Fluorescence microscopy is used to visualize the fluorescent probes bound to the chromosomes. FISH can be used to help identify numerous types of gene alterations, including amplifications, deletions, and translocations.
c.•Flow cytometry -– a technique utilized to measure the characteristics of cell populations. Typically performed on liquid samples such as peripheral blood and bone marrow aspirate, it may also be performed on solid tissue samples such as lymph nodes following additional processing steps. Cells are labeled with selective fluorescent antibodies and analyzed as they flow in a fluid stream through a beam of light. The properties measured in these antibodies include the relative size, relative granularity or internal complexity, and relative fluorescence intensity. These fluorescent antibodies bind to specific cellular antigens and are used to identify abnormal and/or malignant cell populations. Flow cytometry is typically utilized in diagnosing a wide variety of hematopoietic and lymphoid neoplasms. Flow cytometry is also used to monitor patients during the course of therapy to identify extremely low levels of residual malignant cells, known as minimal residual disease (“MRD”) monitoring.
d.•Immunohistochemistry (“IHC”) and Digital Imaging – the process of localizing cellular proteins in tissue sections and relies on the principle of antigen-antibody binding. IHC is widely used in the diagnosis of abnormal cells such as those found in cancer. Specific surface membrane, cytoplasmic, or nuclear markers may be identified. IHC is also widely used to understand the distribution and localization of differentially expressed proteins. Digital imaging allows clients to visualize scanned slides and also perform quantitative analysis for certain stains. Scanned slides are received online in real time and can be previewed often a full day before the glass slides can be shipped back to clients.
e.•Molecular testing – a rapidly growing field which includes a broad range of laboratory techniques utilized in cancer testing. Most molecular techniques rely on the analysis of DNA and/or RNA, as well as the structure and function of genes at the molecular level. Molecular testing technologies include: liquid biopsy tests for advanced non-small cell lung cancer, all solid tumor types (pan-cancer), and certain breast cancer cases; DNA fragment length analysis; polymerase chain reaction (“PCR”) analysis; reverse transcriptase polymerase chain reaction (“RT-PCR”) analysis, real-time (or quantitative) polymerase chain reaction (“qPCR”) analysis; bi-directional Sanger sequencing analysis; and next-generation sequencing (“NGS”) analysis.
f.•Morphologic analysis – the process of analyzing cells under the microscope by a pathologist, usually for the purpose of diagnosis. Morphologic analysis may be performed on a wide variety of samples, such as peripheral blood, bone marrow, lymph node, and from other sites such as lung, breast, etc. The services provided at NeoGenomics may include primary diagnosis, in which a sample is received for processing and our pathologists provide the initial diagnosis; or may include secondary consultations, in which slides and/or tissue blocks are received from an outside institution for a second opinion. In the latter setting, the expert pathologists at NeoGenomics assist our client pathologists on some of their most difficult and complex cases.
Clinical Services Segment
The clinical cancer testing services we offer to community-based pathologists are designed to be a natural extension of, and complementary to, the services that they perform within their own practices. We believe our relationship as a non-competitive partner to community-based pathology practices, hospital pathology labs, reference labs, and academic centers empowerscan empower them to expand their breadth of testing andto provide a menu of services that matchescould match or exceedsexceed the level of service found in any center of excellence around the world. Community-based pathology practices and hospital pathology labs may order certain testing services on a technical component only (“TC” or “tech-only”) basis, which allows them to participate in the diagnostic process by performing the professional component (“PC”) interpretation services without having to hire laboratory technologists or purchase the sophisticated equipment needed to perform the technical component of the tests. We also support our pathology clients with interpretation and consultative services using our own specialized team of pathologists for difficult or complex cases and we provide overflow interpretation services when requested by clients.
NeoGenomics isWe are a leading provider of Molecular and next-generation sequencing (“NGS”)NGS testing. These tests are interpreted by NeoGenomics’ team of Molecular experts and are often ordered in conjunction with other testing modalities. NGS panels are one of our fastest growing testing areas and clients can often receive a significant amount of biomarker information from very limited samples. These comprehensive panels can allow for faster treatment decisions for patients as compared to a series of single-gene molecular tests being ordered sequentially. NeoGenomics hasWe have one of the broadest Molecular menus in the industry and our targeted NeoTYPE panels include genes relevant to a particular cancer type, as well as other complementary tests such as IHC and FISH. In addition, we offer molecular-only NGS targeted and comprehensive panels which combine DNA and RNA into a single work stream in order to report a full spectrum of genomic alterations, including mutation, fusions, copy number variations, and gene expression. This comprehensive menu means that NeoGenomics can be a “one-stop shop” for our clients who can get all of
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as immunohistochemistry and FISH. This comprehensive menu means that NeoGenomics can be a “one-stop shop” for our clients who can get all of their oncology testing needs satisfied by our laboratory. This is attractive to our clients as patient samples do not need to be split and then managed across several laboratories. NeoGenomics expectsThe acquisition of Inivata provided us with oncology Liquid Biopsy technology capabilities. InVisionFirst®-Lung is a highly sensitive, targeted plasma-based assay for patients with non-small cell lung cancer, and RaDaR™ is an industry-leading liquid biopsy assay designed to detect residual disease and recurrence in plasma samples from patients with solid tumor malignancies. We expect our Molecular laboratory and NGS capabilities to be a key growth driver in the coming years.
In addition, we directly serve oncology, dermatology and other clinician practices that prefer to have a direct relationship with a laboratory for cancer-related genetic testing services. We typically serviceserve these types of clients with a comprehensive service offering where we perform both the technical and professional components of the tests ordered. In certain instances, larger clinician practices have begun to internalize pathology interpretation services, and our tech-only service offering allows these larger clinician practices to also participate in the diagnostic process by performing the PC interpretation services on TC testing performed by NeoGenomics.us. In these instances, NeoGenomicswe will typically provide all of the more complex, molecular testing services.
Pharma Services Segment
Our Pharma Services revenue consists of three revenue streams:
•Clinical trials and research;
•Validation laboratory services; and
•InformaticsInformatics.
Our Pharma Services segment supports pharmaceutical firms in their drug development programs by supporting various clinical trials and research. This portion of our business often involves working with the pharmaceutical firms (sponsors)(“sponsors”) on study design as well as performing the required testing. Our medical team often advises the sponsor and works closely with them as specimens are received from the enrolled sites. We also work on developing tests that will be used as part of a companion diagnostic to determine patients’ response to a particular drug. As studies unfold, our clinical trials team reports the data and often provides key analysis and insights back to the sponsors.
Our Pharma Services segment provides comprehensive testing services in support of our pharmaceutical clients’ oncology programs from discovery to commercialization. In biomarker discovery, our aim is to help our customers discover the right content. We help our customers develop a biomarker hypothesis by recommending an optimal platform for molecular screening and backing our discovery tools with the informatics to capture meaningful data. In other pre-clinical and non-clinical work, we can use our platforms to characterize markers of interest. Moving from discovery to development, we seek to help our customers refine their biomarker strategy and, if applicable, develop a companion diagnostic pathway using the optimal technology for large-scale clinical trial testing.
Whether serving as the single contract research organization or partnering with one, our Pharma Services team provides significant technical expertise, working closely with our customers to support each stage of clinical trial development. Each trial we support comes with rapid turnaround time, dedicated project management and quality assurance oversight. We have experience in supporting submissions to the Federal Drug Administration (“FDA”) for companion diagnostics. Our Pharma Services strategy is focused on helping bring more effective oncology treatments to market through providing world-class laboratory services in oncology to key pharmaceutical companies in the industry.
We believe that NeoGenomics is uniquelywe are well positioned to service Pharma sponsors across the full continuum of the drug development process. Our Pharma Services team can work with them during the basic research and development phase as compounds come out of translational research departments as well as work with clients from Phase 1 clinical trials through Phases II and III as the sponsors work to prove the efficacy of their drugs. The laboratory biomarker tests that are developed during this process may become companion diagnostic or CDx(“CDx”) tests, that will be used on patients to determine if they could respond to a certain therapy. NeoGenomics isWe are able to offer these CDx tests to the market immediately after FDA approval as part of our Day 1 readiness program. This ability helps to speed the commercialization of theira drug and enablescan enable Pharma sponsors to reach patients through NeoGenomicsour broad distribution channel in the Clinical Services segment.
We are committed to connecting patients with life-altering therapies and trials. In carrying out these commitments, we aim to provide transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy Practices, and have invested in leading technologies to seek to ensure the data we maintain is secured at all times. We are continuing to develop and broaden our informatics and data-related tools to leverage our unique market position and oncology expertise to help our stakeholders solve real-world problems such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. We are committedalso offer testing and informatics tools to connecting patients with life altering therapieshelp health care professionals in the rapidly evolving field of precision medicine, such as Trapelo™. Trapelo™ is an end-to-end, clinical decision-support platform designed to resolve the complexities of precision oncology – from test ordering to therapy selection to navigating prior authorization. Trapelo™ helps oncologists determine which biomarkers to test and trials. In carrying out these commitments, we aim to provide transparency and choice to patients regardingin selecting the handling and use of their data through our Notice of Privacy Practices, and have invested in leading technologies to ensure the data we maintain is secured at all times.
2021 Focus Areas:
We are committed to sustainable growth while being an innovative leader in our industry. Our focus for 2021 includes initiatives to drive consistent and profitable growth while pursuing innovation and maintaining exceptional service levels. Weappropriate tests from
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laboratory offerings, and then assists with interpreting test results to identify appropriate, evidence-based treatment options. Trapelo™ also collaborates with health plans to embed plan policy at the “point of decision” and streamline prior authorization to optimize the efficient delivery of precision care for better patient outcomes.
2022 Focus Areas:
We are committed to sustainable growth while transforming patient care by being an innovative leader in our industry. Our focus for 2022 is to sustain a purpose driven culture that maintains excellence in service and performance while growing through innovation. We expect thesethe following initiatives to allow the Company to continue on its path to become one of the world’s leading cancer testing and information company.companies:
Strengthen Our World-ClassGrowth through Innovation
•Successfully launch new test offerings and secure reimbursement;
•Expand development of new cancer treatments; and
•Accelerate precision medicine in the community.
Excellence in Service and Performance
•Achieve turnaround time targets;
•Grow consolidated revenue and profitability; and
•Design next-generation Laboratory Information Management System (“LIMS”) platform.
Purpose Driven Culture
Fortifying•Drive an engaged and committed workforce; and
•Foster inclusive and effective leadership by expanding our culture to closely align with the values of inclusion and developing our Company is a key priority. We will invest in the development of our people by creating mentoring, coaching and training opportunities to enhance and capitalize on the talent within our Company. We believe these initiatives will foster a culture of accountability and empowerment and are imperative to providing a meaningful work experience for our employees.
We value the health of our employees and want them to perform at their best, personally and professionally. We actively promote the health and well-being of our employees and recognize that overall health goes beyond greater health benefits and preventative care and includes a variety of areas such as physical, emotional and financial health. We provide a variety of programs to promote the improvement of our employees’ health in these and other areas.
Building a resilient, sustainable organization is central to the success of our Company. Our focus is on expanding our purpose to extend beyond the organization to include all stakeholders. This includes the communities we serve and our society as a whole. We build our talent through coaching and mentoring programs to meet the demands of our critical work of the future and our leadership needs. We will partner within our communities to remove barriers and sponsor educational opportunities needed to meet our highly-skilled workforce demands.
Continue to Provide Uncompromising Quality and Exceptional Service
Maintaining the highest quality laboratory operations and service levels has enabled us to consistently grow our business. We are continuously looking for ways to improve quality and implement best practices to streamline processes. We are focused on increasing automation with solutions that will maintain quality while improving efficiency in operations.
We will continue to grow a culture of quality through our leadership, coaching and employee training initiatives. We aim to empower our employees to deliver high-quality results in their respective function. We will implement initiatives to measure and improve turnaround times while maintaining a culture of quality, which we expect will continue to meet or exceed our customers' expectations.
Pursue Innovation and Growth
Our plans for 2021 include initiatives to continue to drive sustainable growth and innovation. We will continue to pursue market share gains by providing high complexity, cancer-related laboratory testing services to hospitals, community-based pathology and oncology practices, academic centers, clinicians, and pharmaceutical companies. Additionally, we will focus on continued reimbursement effectiveness through improving coverage, streamlining processes and providing clients more efficient, automated ordering methods, which we believe will continue to fuel our growth and market share.
Our laboratory and informatics teams will continue focus on new assays and product offerings, including liquid biopsy, MRD and other high-quality tests. We expect this to enhance our strategic position while enabling us to maintain our high levels of client retention.
Our broad and innovative test menu of molecular, including NGS, immunohistochemistry, and other testing has helped make us a “one-stop shop” for many clients who value that all of their testing can be sent to one laboratory. We will continue to look for growth opportunities through mergers and/or acquisitions and are focused on strategic opportunities that would be complementary to our menu of services and would increase our earnings and cash flow in the short to medium time frame. We are also focused on investing in business development and informatics capabilities to partner with our key stakeholders, including patients, providers, payers and pharmaceutical companies to provide solutions to current or near-term problems that they face.leaders.
Competitive Strengths
In addition to the competitive strengths discussed below, the Company believeswe believe that itsour superior testing technologies and instrumentation, laboratory information system, client education programs, and broad domestic and growing international presence also differentiatesdifferentiate NeoGenomics from its competitors.
Turnaround Times
We strive to provide industry leading turnaround times for test results to our clients nationwide, both in the Clinical Services and Pharma Services segments. By providing information to our clients in a rapid manner, physicians can begin treating their patients as soon as possible. Our consistent timeliness of results by our Clinical Services segment is a competitive strength and a driver of additional testing requests by referring physicians. Rapid turnaround times allow for the performance of other adjunctive tests within an acceptable diagnosis window in order to augment or confirm results and more fully inform treatment
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options. Additionally, we believe that our rapid turnaround time on testing and our project milestones are a key differentiator in our Pharma Services segment.
World-class Medical and Scientific Team
Our team of medical professionals and Ph.Ds.PhDs are specialists in the field of genetics, oncology and pathology. As of March 31, 2021,2022, we employed or contracted with approximately 120 M.D.s130 MDs and Ph.Ds.PhDs. We have many nationally and world-renowned pathologists on staff, which is a key differentiator from many smaller laboratories. Our clinical customers look to our staff and their expertise and they often call our medical team on challenging cases. For our Pharma Services segment, many sponsors work with our medical team on their study design and on the interpretation of results from the studies. Our medical team is a key differentiator as we have a depth of medical expertise that many other laboratories cannot offer to Pharmaceuticalpharmaceutical companies.
Innovative Service Offerings
We believe we currently have the most extensive menu of tech-only FISH services in the country as well as extensive and advanced tech-only flow cytometry and IHC testing services. These types of testing services allow the professional interpretation component of a test to be performed and billed separately by our physician clients. Our tech-only services are designed to give pathologists the option to choose, on a case by case basis, whether they want to order just the technical information and images relating to a specific test so they can perform the professional interpretation, or order “global” services and receive a comprehensive test report which includes a NeoGenomics pathologist’s interpretation of the test results. Our clients appreciate the flexibility to access NeoGenomics’ medical staff for difficult or complex cases or when they are otherwise unavailable to perform professional interpretations.
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We offer a comprehensive suite of technical and interpretation services, to meet the needs of those clients who are not credentialed and trained in interpreting genetic tests and who require pathology specialists to interpret their testing results. In our global service offerings, our lab performs the technical component of the tests and our M.D.sMDs and Ph.Ds.PhDs provide the service of interpreting the results of those tests. Our professional staff is also available for post-test consultative services. Clients using our global service offering rely on the expertise of our medical team to give them the answers they need in a timely manner to help inform their diagnoses and treatment decisions.
We believe we have one of the broadest Molecular and Next Generation SequencingNGS test menus in the world. Clients have the ability to order single gene molecular tests, targeted NeoTYPE panels that include the relevant actionable genes for a particular cancer type as well as large NGS panels. Our Pharma Services Divisionsegment offers a full range of sequencing testing including whole exome and whole genome sequencing. Our menu enables us to be a true “one-stop shop” for our clients as we can meet all of their oncology testing needs.
National Direct Sales Force
Our direct sales force has been trained extensively in cancer genetic testing and consultative selling skills to service the needs of clients. Our sales team for the clinical cancer testing services is organized into ninefive regions -– Northeast, Southeast, North Central, South Central, Great Lakes, Midwest, Southwest, Mid-Atlantic, Florida, and Capital.West. Our Pharma Services segment has a dedicated team of business development specialists who are experienced in working with pharma sponsors and helping them with the testing needs of their research and development projects as well as Phase I, II and III studies. These sales representatives utilize our custom Customer Relationship Management System (“CRM”) to manage their territories, and we have integrated all of the importantkey customer care functionality within our Laboratory Information Services (“LIS”) into the CRM so that our sales representatives can stay informed of emerging issues and opportunities within their regions. Our in-house customer care team is aligned with our field sales team to serve the needs of our clients by utilizing the same LIS and CRM. Our field teams can see in real-time when a client calls the laboratory, the reason for the call, the resolution, and if face-to-face interaction is needed for follow-up. Our sales force educates clients on new test offerings and their proper utilization and our representatives are often seen as trusted advisors by our clients.
Seasonality
The majority of our clinical testing volume is dependent on patients being treated by hematology/oncology professionals and other healthcare providers. The volume of our testing services generally declines modestly during the summer vacation season, year-end holiday periods and other major holidays, particularly when those holidays fall during the middle of the week. In addition, the volume of our testing tends to decline due to extreme adverse weather conditions, such as excessively hot or cold spells, heavy snow, hurricanes or tornadoes in certain regions, consequently reducing revenues and cash flows in any affected period.
In our Pharma Services segment, we enter into both short-term and long-term contracts, ranging from one month to several years. While the volume of this testing is not as directly affected by seasonality as described above, the testing volume does
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vary based on the terms of the contract. Our volumes are often based on how quickly sponsors can get patient enrollees for their trials and seasonality can impact how quickly they can get patients enrolled. Many of our long-term contracts contain specific performance obligations where the testing is performed on a specific schedule. This results in revenue that is not consistent among periods. In addition, this results in backlog that can be significant.
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Results of Operations for the Three Months Ended March 31, 2021 as Compared to the Three Months Ended March 31, 2020
The following table presents the Consolidated Statements of Operations as a percentage of revenue:
 Three Months Ended March 31,
 20212020
Net revenue100.0 %100.0 %
Cost of revenue64.0 %56.3 %
Gross Profit36.0 %43.7 %
Operating expenses:
General and administrative35.1 %34.3 %
Research and development2.1 %1.9 %
Sales and marketing11.9 %12.5 %
Total operating expenses49.1 %48.7 %
Loss from operations(13.1)%(5.0)%
Interest expense, net1.0 %0.8 %
Other (income) expense, net4.2 %(0.2)%
Loss before taxes(18.3)%(5.6)%
Income tax expense0.8 %1.0 %
Net loss(19.1)%(6.6)%
Clinical and Pharma Services revenue for the periods presented are as follows ($ in thousands):
 Three Months Ended March 31,
20212020$ Change% Change
Net revenues:
Clinical Services$96,487 $92,982 $3,505 3.8 %
Pharma Services19,046 13,048 5,998 46.0 %
Total revenue$115,533 $106,030 $9,503 9.0 %
Revenue
Consolidated revenues increased $9.5 million, or 9%, year-over-year. Clinical Services revenue for the three months ended March 31, 2021 increased $3.5 million when compared to the same period in 2020. Clinical testing volume(1) increased by approximately 4.2% for the three months ended March 31, 2021, compared to the same period in 2020.
Due to the broad roll-out of the COVID-19 vaccine and a sharp decline in the demand for COVID-19 PCR testing, we made the decision at the end of the first quarter 2021 to exit from COVID-19 PCR testing which was included in Clinical Services segment revenue. The Clinical division’s continued focus is its broad and innovative testing menu as well as any future new product offerings.
Pharma Services revenue for the three months ended March 31, 2021 increased $6 million compared to the same period in 2020. In addition, our backlog of signed contracts has continued to grow from $208.9 million as of December 31, 2020 to $217.6 million as of March 31, 2021. We expect this backlog to result in higher revenues in future quarters.
The following table shows Clinical revenue, cost of revenue, requisitions received and tests performed for the three months ended March 31, 2021 and 2020 excluding requisitions, tests, revenue and costs of revenue for Pharma Services and COVID-19 PCR tests. Testing revenue and cost of revenue are presented in thousands below:

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Three Months Ended March 31,
20212020% Change
Clinical(1):
Requisitions (cases) received151,145 144,319 4.7 %
Number of tests performed260,941 250,376 4.2 %
Average number of tests/requisitions1.73 1.73 — %
Clinical testing revenue(1)
$94,930 $92,982 2.1 %
Average revenue/requisition$628 $644 (2.5)%
Average revenue/test$364 $371 (1.9)%
Cost of revenue(1)
$53,632 $48,923 9.6 %
Average cost/requisition$355 $339 4.7 %
Average cost/test$206 $195 5.6 %
Results of Operations for the Three Months Ended March 31, 2022 as Compared to the Three Months Ended March 31, 2021
The following table presents the Consolidated Statements of Operations as a percentage of net revenue:
 Three Months Ended March 31,
 20222021
Net revenue100.0 %100.0 %
Cost of revenue(1)
67.4 %64.0 %
Gross Profit32.6 %36.0 %
Operating expenses:
General and administrative56.5 %35.1 %
Research and development6.6 %2.1 %
Sales and marketing13.9 %11.9 %
Total operating expenses77.0 %49.1 %
Loss from operations(44.4)%(13.1)%
Interest (income) expense, net1.1 %1.0 %
Other (income) expenses, net(0.1)%4.2 %
Loss before taxes(45.4)%(18.3)%
Income tax (benefit) expense(3.2)%0.8 %
Net loss(42.2)%(19.1)%
 (1) Clinical tests exclude requisitions, tests, revenue and costsCost of revenue for Pharma Services and COVID-19 PCR tests.
Averagethe three months ended March 31, 2022 includes $4.9 million of amortization of acquired Inivata developed technology intangible assets. Cost of revenue per test decreased 1.9% for the three months ended March 31, 2021 includes write-offs of $5.3 million for COVID-19 PCR testing inventory.
Clinical and Pharma Services net revenues for the periods presented are as follows ($ in thousands):
 Three Months Ended March 31,
20222021$ Change% Change
Net revenue:
Clinical Services$98,791 $96,487 $2,304 2.4 %
Pharma Services18,378 19,046 (668)(3.5)%
Total revenue$117,169 $115,533 $1,636 1.4 %
Revenue
Consolidated revenues increased $1.6 million, or 1.4%, year-over-year. Clinical Services revenue for the three months ended March 31, 2022 increased $2.3 million, when compared to the correspondingsame period in 2020,2021. Increases in Clinical Services revenue were due to an increaseincreases in lower-priced client direct bill revenue.testing volume and average unit price.
Pharma Services revenue for the three months ended March 31, 2022 decreased $0.7 million, compared to the same period in 2021 driven by higher testing volumes that occurred in March of 2021. Our backlog of signed contracts has continued to grow from $267 million as of December 31, 2021 to $282 million as of March 31, 2022. We define backlog as the stated amount of signed contracts less dormant contracts with no activity for twelve months, contingencies and cancellations.
Cost of Revenue and Gross Profit
Cost of revenue includes payroll and payroll related costs for performing tests, maintenance and depreciation of laboratory equipment, rent for laboratory facilities, laboratory reagents, probes and supplies, and delivery and courier costs relating to the transportation of specimens to be tested.
Average cost per clinical test increased 5.6% for the three months ended March 31, 2021, compared to the corresponding period in 2020, reflecting a volume reduction due to the COVID-19 pandemic and the fixed nature of many of our laboratory costs. In addition, we did not reduce our workforce due to temporary declines in volume related to the COVID-19 pandemic.
The consolidated cost of revenue and gross profit metrics are as follows:
 Three Months Ended March 31,
($ in thousands)20212020% Change
Cost of revenue:
Clinical Services(2)
$61,565 $48,923 25.8 %
Pharma Services12,394 10,738 15.4 %
Total cost of revenue$73,959 $59,661 24.0 %
Cost of revenue as a % of revenue64.0 %56.3 %
Gross profit:
Clinical Services$34,922 $44,059 (20.7)%
Pharma Services6,652 2,310 188.0 %
Total gross profit$41,574 $46,369 (10.3)%
Gross profit margin36.0 %43.7 %
(2) Clinical Services cost of revenue includes write-offs of $5.3 million for COVID-19 PCR testing inventory for the three months ended March 31, 2021.
Consolidated cost of revenue in dollars increased for the three months ended March 31, 2021 when compared to the same period in 2020. Consolidated cost of revenue as a percentage of revenue also increased year-over-year. The increase in cost of revenue is largely due to an increase in supplies expense and payroll related costs. In addition, at the end of the first quarter 2021, due to the broad roll-out of the COVID-19 vaccine and a sharp decline in COVID-19 PCR testing demand, we made the decision to exit COVID-19 PCR testing and recorded a write-off of $5.3 million for all remaining COVID-19 PCR testing inventory to cost of revenue in the first quarter of 2021.
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GrossThe consolidated cost of revenue and gross profit margin decreasedmetrics are as follows:
 Three Months Ended March 31,
($ in thousands)20222021% Change
Cost of revenue:
Clinical Services(3)
$65,267 $61,565 6.0 %
Pharma Services13,670 12,394 10.3 %
Total cost of revenue$78,937 $73,959 6.7 %
Cost of revenue as a % of revenue67.4 %64.0 %
Gross profit:
Clinical Services$33,524 $34,922 (4.0)%
Pharma Services4,708 6,652 (29.2)%
Total gross profit$38,232 $41,574 (8.0)%
Gross profit margin32.6 %36.0 %
(3) Clinical Services cost of revenue for the three months ended March 31, 2022 includes $4.3 million of amortization of acquired Inivata developed technology intangible assets. Clinical Services cost of revenue for the three months ended March 31, 2021 write-offs of $5.3 million for COVID-19 PCR testing inventory. Pharma Services cost of revenue for the three months ended March 31, 2022 includes $0.6 million of amortization of acquired Inivata developed technology intangible assets.
Consolidated cost of revenue increased for the three months ended March 31, 2022 when compared to the same period in 2020. This decrease was a result of the combined effect of lower testing volume2021 due to the impactamortization of the COVID-19 pandemic, adverse weather in February,acquired Inivata developed technology intangible assets of $4.9 million and higher payroll and payroll-related costs, as well as acosts. These increases in cost of revenue were partially offset by the first quarter of 2021 including write-offs of $5.3 million for inventory write-off due to the exit from COVID-19 PCR testing recorded to cost of revenuewhereas there were no such inventory write-offs in the first quarter of 2022.
Gross profit margin for the three months ended March 31, 2022 was 32.6% compared to 36.0% in the same period of 2021. This 3.4% decrease is primarily due to amortization of acquired Inivata developed technology intangible assets of $4.9 million and the fixed nature of many of our laboratory costs.
General and Administrative Expenses
General and administrative expenses consist of payroll and payroll related costs for our executive, billing, finance, human resources, information technology, and other administrative personnel, as well as stock-based compensation. We also allocate professional services, facilities expense, IT infrastructure costs, depreciation, amortization and other administrative-related costs to general and administrative expenses.
Consolidated general and administrative expenses are as follows:
Three Months Ended March 31, Three Months Ended March 31,
($ in thousands)($ in thousands)20212020$ Change% Change($ in thousands)20222021$ Change% Change
General and administrativeGeneral and administrative$40,476 $36,344 $4,132 11.4 %General and administrative$66,248 $40,476 $25,772 63.7 %
As a % of revenueAs a % of revenue35.1 %34.3 %As a % of revenue56.5 %35.1 %

General and administrative expenses increased $4.1$25.8 million for the three months ended March 31, 20212022, when compared to the same periodperiods in 2020. The2021. This increase includeswas partially due to an increase in non-cash stock-based compensation expenses of $9.5 million, which included incremental stock-based compensation of $5.9 million for the acceleration of stock option and restricted stock awards upon the Chief Executive Officer’s departure in the first quarter of 2022, and also due to $1.6 million of severance costs related to the Chief Executive Officer’s departure. In addition, the increase reflects the addition of general and administrative expenses for the Inivata and Trapelo Health subsidiaries which were acquired in the second quarter of 2021, higher payroll and payroll-related costs due to increases in personnel to support our nearstrategic growth initiatives, and long-term growth, $0.8 million in acquisition costs, a write-off of $0.8 million for all remaining COVID-19 PCR testing laboratory equipment, and $0.5 million for CEO transition costs.
We expect our general and administrative expenses toan increase in total but decrease as a percentage of revenue as we add employee and compensation expenses, incur additional expenses associated with the expansion of our facilities, and continue to expand our physical and technological infrastructure to support our anticipated growth.professional fees.
Research and Development Expenses
Research and development expenses relate to costs of developing new proprietary and non-proprietary genetic tests, including payroll and payroll related costs, maintenance of laboratory equipment, laboratory supplies (reagents), and outside consultants and experts assisting our research and development team.
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Consolidated research and development expenses for the periods presented are as follows:
Three Months Ended March 31, Three Months Ended March 31,
($ in thousands)($ in thousands)20212020$ Change% Change($ in thousands)20222021$ Change% Change
Research and developmentResearch and development$2,456 $2,060 $396 19.2 %Research and development$7,713 $2,456 $5,257 214.0 %
As a % of revenueAs a % of revenue2.1 %1.9 %As a % of revenue6.6 %2.1 %

Research and development expenses increased $0.4$5.3 million for the three months ended March 31, 20212022 when compared to the same period in 2020.2021. This increase reflects the addition of research and development expenses for the Inivata subsidiary which was driven by investmentsacquired in new test development, particularly in our next-generation sequencing and FDA initiatives.the second quarter of 2021.
We anticipate research and development expenditures will significantly increase in future quarters as we continue to invest in development costs for innovation projects and bringing new tests to market.
Sales and Marketing Expenses
Sales and marketing expenses are primarily attributable to employee-related costs including sales management, sales representatives, sales and marketing consultants, and marketing and customer service personnel.
Consolidated sales and marketing expenses for the periods presented are as follows:
 Three Months Ended March 31,
($ in thousands)20212020$ Change% Change
Sales and marketing$13,749$13,258 $491 3.7 %
As a % of revenue11.9 %12.5 %
 Three Months Ended March 31,
($ in thousands)20222021$ Change% Change
Sales and marketing$16,299 $13,749 $2,550 18.5 %
As a % of revenue13.9 %11.9 %
 
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Sales and marketing expenses increased $0.5$2.6 million for the three months ended March 31, 20212022, when compared to the same period in 2020.2021. This increase primarily reflects higher commissionsan increase in payroll and payroll-related costs due to our increase in revenues, the expansion of our sales team and continued investment in marketing.
We expect higher commissions expense in the coming quarters as our sales representatives continue generating new business with a focus on oncology office sales.in both of our business segments. We expect our sales and marketing expenses over the long term to align with changes in revenue.
Interest Expense, net
Net interest expense was flat for the three months ended March 31, 2021 increased $0.4 million2022, compared to the same period in 2020.2021. Interest expense reflects the effective interest rate on the 2028 Convertible Notes and the 2025 Convertible Notes which is 0.70% and 1.96%, respectively. Interest on the 2028 Convertible Notes and 2025 Convertible Notes began accruing upon issuance and is payable semi-annually. For further details regarding the convertible notes, please refer to Note 7.6. Debt, in the accompanying notes to the unaudited Consolidated Financial Statements.
Loss Per Share
The following table provides consolidated net loss for each period along with the computation of basic and diluted net loss per share for the three months ended March 31, 20212022 and 20202021 (in thousands, except net loss per share amounts)data):
Three Months Ended March 31, Three Months Ended March 31,
2021202020222021
Net loss$(22,114)$(6,978)
NET LOSSNET LOSS$(49,408)$(22,114)
Basic weighted average shares outstandingBasic weighted average shares outstanding116,199 104,484 Basic weighted average shares outstanding123,630 116,199 
Diluted weighted average shares outstandingDiluted weighted average shares outstanding116,199 104,484 Diluted weighted average shares outstanding123,630 116,199 
Basic net loss per shareBasic net loss per share$(0.19)$(0.07)Basic net loss per share$(0.40)$(0.19)
Diluted net loss per shareDiluted net loss per share$(0.19)$(0.07)Diluted net loss per share$(0.40)$(0.19)




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Non-GAAP Measures 

Use of Non-GAAP Financial Measures
TheIn order to provide greater transparency regarding our operating performance, the financial results and financial guidance are provided in accordance with GAAP and usinginclude the use of certain non-GAAP financial measures.measures that involve adjustments to GAAP results. Non-GAAP financial measures exclude certain income and/or expense items that management believes are not directly attributable to the Company’s core operating results and/or certain items that are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance. Management believes that the presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors and facilitatesby facilitating the analysis of the Company’s core operating results and comparison of coretest-level operating results across reporting periods.periods and when comparing those same results to those published by our peers. These non-GAAP financial measures may also assist investors in evaluating future prospects. Management also uses non-GAAP financial measures for financial and operational decision making, planning and forecasting purposes and to manage the business. Management believes that these non-GAAP financial measures enable investors to evaluate the operating results and future prospects in the same manner as management. TheThese non-GAAP financial measures do not replace the presentation of financial information in accordance with U.S. GAAP financial results, should not be considered measures of liquidity, and should onlyare unlikely to be used as a supplementcomparable to and not as a substitute for, the financial results presented in accordance with GAAP. There are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation, and do not present the full measure of the recorded costs against its net revenue. In addition, the definition of the non-GAAP financial measures below may differ from non-GAAP measures used by other companies.
 
Definitions of Non-GAAP Measures

Non-GAAP Adjusted EBITDA
“Adjusted EBITDA” is defined by NeoGenomics as net loss(loss) income from continuing operations before: (i) interest expense, (ii) tax (benefit) or expense, (iii) depreciation and amortization expense, (iv) non-cash stock-based compensation expense, and, if applicable in a reporting period, (v) acquisition and integration related expenses, (vi) CEO transition costs, (vii) write-off of COVID-19 PCR testing inventory and equipment, (viii) and (vii) other significant non-recurring or non-operating (income) or expenses, net.
The following is a reconciliation of GAAP net loss(loss) income to Non-GAAP EBITDA and Adjusted EBITDA for the three months ended March 31, 2021:
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2022:
Three Months Ended March 31,
(in thousands)20212020
Net loss (GAAP)$(22,114)$(6,978)
Adjustments to net loss:
Interest expense, net1,177 819 
Income tax expense976 1,089 
Amortization of intangibles2,458 2,452 
Depreciation6,680 6,240 
EBITDA (non-GAAP)$(10,823)$3,622 
Further adjustments to EBITDA:
Acquisition and integration related expenses814 1,296 
Write-off of COVID-19 PCR testing inventory and equipment6,061 — 
CEO transition costs460 — 
Non-cash stock-based compensation expense2,653 2,186 
Other significant non-recurring expenses (income), net (1)
5,021 (30)
Adjusted EBITDA (non-GAAP)$4,186 $7,074 

Three Months Ended March 31,
(in thousands)20222021
Net loss (GAAP)$(49,408)$(22,114)
Adjustments to net loss:
Interest expense, net1,301 1,177 
Income tax (benefit) expense(3,753)976 
Depreciation8,395 6,680 
Amortization of intangibles8,490 2,458 
EBITDA (non-GAAP)$(34,975)$(10,823)
Further adjustments to EBITDA:
Acquisition and integration related expenses1,030 814 
Write-off of COVID-19 PCR testing inventory and equipment— 6,061 
Non-cash stock-based compensation expense12,103 2,653 
Other significant (income) expenses, net (1)
2,831 5,481 
Adjusted EBITDA (non-GAAP)$(19,011)$4,186 
(1) OtherFor the three months ended March 31, 2022, other significant (income) expenses, net, includes a gain on the sale of a building, fees related to the regulatory matter, CEO transition costs, and other non-recurring items. For the three months ended March 31, 2021, other significant non-recurring (income) expenses, (income), net, includes unrealized loss on investment in non-consolidated affiliate, CEO transition costs, and other non-recurring items.
Liquidity and Capital Resources
To date, we have financed our operations primarily through cash generated from operations, public and private sales of debt and equity securities, and bank debt borrowings.
The following table presents a summary of our consolidated cash flows for operating, investing and financing activities for the three months ended March 31, 20212022 and 20202021 as well balances of cash and cash equivalents and working capital:
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Three Months Ended March 31, Three Months Ended March 31,
(in thousands) (in thousands)20212020 (in thousands)20222021
Net cash provided by (used in):  
Net cash (used in) provided by:Net cash (used in) provided by:  
Operating activitiesOperating activities$2,210 $(6,933)Operating activities$(29,040)$2,210 
Investing activitiesInvesting activities(154,688)(41,708)Investing activities12,052 (154,688)
Financing activitiesFinancing activities524,935 617 Financing activities6,057 524,935 
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash372,457 (48,024)Net change in cash, cash equivalents and restricted cash(10,931)372,457 
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period$250,632 $173,016 Cash, cash equivalents and restricted cash, beginning of period$316,827 $250,632 
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period$623,089 $124,992 Cash, cash equivalents and restricted cash, end of period$305,896 $623,089 
Working Capital (1), end of period
Working Capital (1), end of period
$874,982 $147,793 
Working Capital (1), end of period
$569,030 $874,982 
(1) Defined as current assets less current liabilities.
Cash Flows from Operating Activities
During the three months ended March 31, 2021,2022, cash used in operating activities was $29.0 million compared to $2.2 million of cash provided by operating activities was $2.2 million, consisting of net loss of $22.1 million plus adjustments to the net loss of $25.7 million. Included in the adjustments to the net loss was $6.1same period in 2021. This $31.3 million of write-offs of COVID-19 PCR testing inventory and equipment related to the exit from COVID-19 PCR testing. The adjustments were partially offset by the cash flow impact of net changes in operating assets and liabilities of $1.4 million. The change in operating assetsdecrease was primarily driven by our operating results (net loss adjusted for depreciation, amortization of intangibles, and other non-cash charges) which resulted in $21.6 million of higher cash used by operating activities year-over-year, as well as a decrease$9.7 million year-over-year increase in accounts payable duecash used to timingfund net operating assets. The increase in cash used by operating activities in the three months ended March 31, 2022 compared to the same period in 2021 reflects cash used to fund the operating activities of payments, partially offset by a decreaseour Inivata and Trapelo Health subsidiaries which were acquired in accounts receivable duethe second quarter of 2021, higher payroll and payroll-related costs to timing of cash receipts.support our strategic growth initiatives, and an increase in professional fees.
Cash Flows from Investing Activities
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

During the three months ended March 31, 2021,2022, cash provided by investing activities was $12.1 million compared to $154.7 million of cash used in investing activities was $154.7 million, an increase of approximately $113.0 million compared toin the same period in 2020.2021. This change was primarily due to an increasea $121.6 million decrease in purchases of net investments in marketable securities of $123.9 million, $15.8 million of cash used for capital expenditures and the disbursement of a $15 million loan receivable from non-consolidated affiliate.year-over-year.
Cash Flows from Financing Activities
During the three months ended March 31, 2021,2022, cash provided by financing activities was $524.9$6.1 million compared to $0.6$524.9 million in the same period in 2020. Cash2021. The cash provided by financing activities during the three months ended March 31, 20212022 consisted of convertible debt proceeds of $334.4 million, net of issuance costs, $218.3 million of net proceeds from the equity offering and $2.6$6.4 million for the net issuance of common stock. This activity was primarilystock partially offset by $0.3 million used for the userepayment of equipment financing obligations. The primary reason for the decrease in cash provided by financing activities year-over-year was that there were no convertible debt or equity offerings in the amountsthree months ended March 31, 2022. Comparatively, the three months ended March 31, 2021 had convertible debt net proceeds of $334.4 million and equity offering net proceeds of $218.3 million, partially offset by $29.3 million forof premiums paid for capped call confirmations and $1.1 million for the net repayment of equipment financing obligations.confirmations.
Liquidity Outlook
We had $612$305.9 million in unrestricted cash and cash equivalents as of March 31, 20212022 in addition to $190.7$175.5 million of marketable securities available to support current operational liquidity needs. We anticipate that the cash on hand, marketable securities and cash collections are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include, but are not limited to, the planned costs to operate our business, including amounts required to fund working capital and capital expenditures, continued research and development efforts, and potential strategic acquisitions and investments.
On January 6, 2021, we entered into an underwriting agreement relating to the issuance and sale of 4,081,632 shares of our common stock (the “2021 Common Stock Offering”), $0.001 par value per share. The price to the public in this offering was $49.00 per share and the Company agreed to sell the shares to the Underwriters at the public offering price, less underwriting discounts and commission of $2.45 per share. Under the terms of the underwriting agreement, the Company also granted the Underwriters a 30-day option to purchase up to 612,244 additional shares of common stock at the public offering price, less underwriting discounts and commissions. On January 6, 2021, the Underwriters exercised their option and purchased all 612,244 shares. The net proceeds from the 2021 Common Stock Offering and full exercise of the Underwriters’ option were approximately $218.3 million, net of underwriting commissions of approximately $11.7 million.
On January 11, 2021, we completed the sale of $345 million of 0.25% Convertible Senior Notes due January 2028 (the “2028 Convertible Notes”), including the full exercise of the underwriters’ option to purchase an additional $45 million aggregate principal amount of the 2028 Convertible Notes (the “2028 Over-allotment Option”) on the same terms and conditions, solely to cover over-allotments with respect to the 2028 Convertible Notes offering. The total net proceeds from the issuance of the 2028 Convertible Notes and the total exercise of the 2028 Over-allotment Option was approximately $334.4 million, which includes approximately $10.6 million of discounts, commissions and offering expenses paid by the Company. For further details regarding the 2028 Convertible Notes, please refer to Note 7. Debt in the accompanying notes to the Consolidated Financial Statements.
We used $29.3 million of the net proceeds from the offerings to enter into capped call transactions. We intend to use the remaining net proceeds from the offerings for general corporate purposes and/or to acquire or invest in complementary businesses and technologies.
We anticipate that the cash on hand, marketable securities and cash collections are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include, but are not limited to, the planned costs to operate our business, including amounts required to fund working capital and capital expenditures, continued research and development efforts, and potential strategic acquisitions and investments.
Capital Expenditures
We forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently anticipate that our capital expenditures for the year ending December 31, 20212022 will be in the range of $45$25.0 million to $55$35.0 million. During the three months ended March 31, 2021,2022, we purchased, with cash, approximately $15.8$8.2 million of capital equipment, software and leasehold improvements. We have funded and plan to continue funding these capital expenditures with cash and financing.
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NEOGENOMICS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Please refer to our critical accounting policies as disclosed in
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NEOGENOMICS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

our Annual Report on Form 10-K for the year ended December 31, 20202021 and Note 2. Summary of Significant Accounting Policies, in the accompanying notes to ourthe unaudited Consolidated Financial Statements for a complete description of our significant accounting policies.
Off-balance Sheet Arrangements
As of March 31, 2021, we do not use or have special purpose entities or other off-balance sheet financing techniques that we believe have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital resources.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates, interest rates and other relevant market rate or price changes. We are exposed to market risks, including changes in interest rates and foreign currency exchange rates.
Interest Rate Risk
We areIn May 2020, we issued $201.3 million aggregate principal amount of the 2025 Convertible Notes. The 2025 Convertible Notes have a fixed annual interest rate of 1.25%; therefore, we do not have economic interest rate exposure with respect to the 2025 Convertible Notes. In January 2021, we issued $345.0 million aggregate principal amount of the 2028 Convertible Notes. The 2028 Convertible Notes have a fixed annual interest rate of 0.25%; therefore, we do not have economic interest rate exposure with respect to the 2028 Convertible Notes. However, the fair value of the 2025 Convertible Notes and 2028 Convertible Notes is exposed to interest rate riskrisk. Generally, the fair market value will increase as interest rates fall and decrease as interest rates rise. In addition, the fair value is affected by our common stock price. The fair value will generally increase as our common stock price increases and will generally decrease as our common stock price declines. We carry the 2025 Convertible Notes and 2028 Convertible Notes at face value less unamortized debt discount and debt issuance costs on our short-term investments. balance sheet, and we present the fair value for required disclosure purposes only.
The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest in highly liquid and high-quality U.S. government and other highly credit rated debt securities. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our investments. To minimize our exposure due to adverse shifts in interest rates, we invest in short-term securities with short maturities. If a 1% change in interest rates were to have occurred on March 31, 2021,2022, this change would not have had a material effect on the fair value of our investment portfolio as of that date. Due to the short holding period of our investments, we have concludeddo not believe that we do not have a material financial market risk exposure.exposure and do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates. While we believe our marketable securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value.
Foreign Currency Exchange Risk
We have operations in Cambridge, United Kingdom; Rolle, Switzerland, SingaporeSwitzerland; Suzhou, China; and Suzhou, China.Singapore. Our international revenues and expenses denominated in foreign currencies (primarily British Pounds, Swiss Francs, Chinese Renminbi and Singapore Dollars and Chinese Renminbi),Dollars) expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. We do not hedge foreign currency exchange risks and do not currently believe that these risks are significant.
 
ITEM 4. CONTROLS AND PROCEDURES 
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As required by SEC Rule 15d-15, our management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 
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PART II — OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
None forFrom time to time the quarterly period ended March 31, 2021.Company is engaged in legal proceedings in the ordinary course of business. For further information on legal proceedings, please refer to Note 11. Commitments and Contingencies, in the notes to the unaudited Consolidated Financial Statements.
 
ITEM 1A. RISK FACTORS
There have been no material changes in ourYou should carefully consider each of the risk factors from those set forthdescribed in Part I, Item 1A, “Risk Factors” contained in our Annual Report on Form 10-K for the for the year ended December 31, 2020,2021, as filed with the SEC on February 25, 2022, as well as the other information set forth in this Quarterly Report on Form 10-Q. There have been no material changes from the risk factors as described in our Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
None for the quarterly period ended March 31, 2021.2022 that have not previously been included in a Current Report on Form 8-K.

Issuer Purchases of Equity Securities
The following table sets forth information concerning our purchases of common stock for the periods indicated:
Period of Repurchase
Total Number of Shares Purchased(1)
Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2021 - January 31, 2021182 $52.57 — — 
February 1, 2021 - February 28, 20218 $54.43 — — 
March 1, 2021 - March 31, 202111,963 $50.46 — — 
Total12,153 $50.49 — — 
Period of Repurchase
Total Number of Shares Purchased(1)
Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2022 - January 31, 202251 $28.40 — — 
February 1, 2022 - February 28, 202213 $21.87 — — 
March 1, 2022 - March 31, 202258,492 $17.90 — — 
Total58,556 — — 

(1) The Company’s Equity Incentive Plan, as amended on May 25, 2017,27, 2021, allows participants to surrender already-owned shares having a fair market value equal to the required withholding tax related to the vesting of restricted stock. Pursuant to a share withholding election made by participants in connection with the vesting of such awards, all of which were outside of a publicly-announced repurchase plan, we acquired from such participants the shares noted in the table above to satisfy tax withholding obligations related to the vesting of their restricted stock. The average prices listed in the above table are averages of the fair market prices at which we valued shares withheld for purposes of calculating the number of shares to be withheld.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.None.
 
 
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
 
ITEM 5. OTHER INFORMATION
None.
 
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ITEM 6. EXHIBITS
EXHIBIT
NO.		 DESCRIPTION
10.110.1*
10.210.2*
10.3
10.4
10.5*
31.1 
   
31.2 
   
32.1 
   
101101.INSXBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Comprehensive Loss and (v) related notesXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Labels Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104The cover page of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in iXBRL (includedCover Page Interactive File (formatted as inline XBRL and contained within Exhibit 101 attachments)101)
*Denotes a management contract or compensatory plan or arrangement.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 6, 20219, 2022 NEOGENOMICS, INC.
     
  By: /s/ Mark W. MallonLynn A. Tetrault
 Name:Mark W. MallonLynn A. Tetrault
  Title: Chief Executive OfficerChair of the Board of Directors and
    Principal Executive Officer
  By: /s/ KathrynWilliam B. McKenzieBonello
  Name: KathrynWilliam B. McKenzieBonello
  Title: Chief Financial Officer
     

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